5 Transportation Stocks That Escaped 2017 Sector Shortfall

It is a well-documented fact that the widely-diversified transportation sector, which includes airline companies, railroads, truckers, and shippers to name a few, has had a turbulent time in 2017 due to multiple headwinds. Issues ranging from customer dissatisfaction, high fuel costs, driver shortages, technological glitches and service disruptions due to hurricanes have let sector participants down at various times of the year.

Let’s have a deeper look into the major headwinds that have hampered this sector.

Probably, the most infamous incident to have plagued the sector in 2017 was the David Dao incident at United Airlines, the wholly owned subsidiary of United Continental (UAL – Free Report), on Apr 9. The passenger dragging episode drew flak from across the globe, resulting in multiple apologies from the company. Apart from United Airlines, customer dissatisfaction issues have also hurt other airline operators like Spirit Airlines (SAVE – Free Report).

The rise in fuel prices also do not bode well for transportation stocks as expenses related to the commodity are one of the largest input costs for any sector participant. In fact, oil prices have increased more than 37% in the last three months, hitting a more than two-year high of around $59 recently.

Additionally, the recent hurricanes disrupted operations of major sector participants. Consequently, airline operators like United Continental had to cancel multiple flights causing significant loss of revenues.

Hurricanes also hurt operations of major railroads like Union Pacific Corp. (UNP – Free Report) and Norfolk Southern Corp. (NSC – Free Report) by damaging important rail lines. Freight costs skyrocketed following the natural disasters. Railroads have also been negatively impacted this year by weakness in the automotive sector due to sluggish vehicle production in the United States.

In 2017, technological glitches have hurt sector participants as well. Operations at FedEx Corp.’s (FDX – Free Report) subsidiary, TNT Express, were crippled by a cyberattack in June. The attack caused large-scale service delays.

Due to the above-mentioned headwinds, the Zacks transportation sector is currently placed at the bottom among the 16 Zacks Classified sectors.

S&P 500 Going from Strength to Strength

With the domestic economy on a solid footing, it is of little surprise that U.S. stock markets are hitting all-time highs on a fairly regular basis. The S&P 500 also maintained its upward journey for 13 straight months through November. The benchmark index, in fact, hasn’t seen a drop of at least 3% since Nov 7, 2016, the longest stretch on record. The index had rallied more than 19% so far this year and is on track to record its best year since 2013.