Why Investors Need to Take Advantage of These 2 Transportation Stocks Now

Zacks highlights its Earnings ESP tool as a method to identify stocks likely to beat earnings estimates, noting that combining a Zacks Rank #3 (Hold) or better with a positive ESP has historically yielded a 70% positive surprise rate and 28.3% average annual returns over a 10-year backtest. The article specifically points to Delta Air Lines (DAL) with an 8.64% ESP and Union Pacific (UNP) with a 0.78% ESP as transportation stocks with a high probability of outperforming expectations in their upcoming earnings reports.

Analysis

The Zacks Earnings ESP model indicates a heightened probability of positive earnings surprises for two transportation sector stocks, Delta Air Lines (DAL) and Union Pacific (UNP), ahead of their upcoming quarterly reports. According to the methodology's 10-year backtest, a positive ESP combined with a Zacks Rank of #3 (Hold) or better has historically resulted in an earnings beat 70% of the time, with the strategy yielding an average annual return of 28.3%. For Delta Air Lines, the signal is particularly strong, with an Earnings ESP of +8.64% stemming from a Most Accurate Estimate of $1.70 per share versus a consensus of $1.56. This suggests recent upward analyst revisions are significantly outpacing the broader consensus ahead of its report in 10 days. Union Pacific also shows a positive signal with an ESP of +0.78%, based on a Most Accurate Estimate of $2.99 versus a $2.97 consensus, pointing to a potential beat for its report in 24 days, albeit with a less pronounced deviation than DAL. Both companies currently hold a neutral #3 (Hold) rank, implying an expectation of in-line market performance.

Key Decisions for Investors

• Investors may consider initiating or adding to positions in DAL and UNP ahead of their earnings reports to capitalize on the high probability of a positive earnings surprise indicated by the Zacks ESP model.
• Given Delta Air Lines' significantly higher ESP of +8.64% compared to Union Pacific's +0.78%, traders focused on event-driven strategies might view DAL as having a greater potential for a substantial upside beat and subsequent price movement.
• It is crucial to note that both stocks carry a neutral 'Hold' rating, suggesting that while an earnings beat is probable, the underlying expectation is for performance in-line with the market, warranting a balanced approach to position sizing.