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Will Q4 Rally In Transports Push Through 2012?

Tuesday, 27 Dec 2011 | 6:29 PM ET

Transports have surged more than 15 percent in the fourth quarter, but what does the road ahead look like heading into 2012?

Art Hatfield, transportation analyst at Morgan Keegan, said Tuesday on “Fast Money” that despite headwinds in Europe, tight capacity has continued to move pricing higher — and shows no signs of letting up.

“If you look at third-quarter results that were reported in the fourth quarter, 26 out of 27 companies we follow either reported in line or beat expectations,” he said. “The results have been good, and actually the outlook has been getting better as we speak.”

Transportation Stocks on a Tear in Q4
Discussing GE's move into online banking, and a look at transportation stocks, which are up 20% in Q4, nearly double the return in the S&P 500. So what's behind the surge and where are the opportunities? Arthur Hatfield, Morgan Keegan transportation analyst, discusses.

In such a tight supply-demand environment, Hatfield said that two possible winners could be UPS and FedEx, which are both able to flow freight toward their assets. That would, in turn, help their bottom lines.

“We see the asset-based carriers benefiting from that, and those who are non-asset-based — companies like UTI Worldwide, Expeditors — really being, I wouldn’t say hurt significantly, but hurt slightly in their earnings profile as the capacity situation continues to tighten up,” he said.

“Fast Money” pro Mike Murphy noted that railcar manufacturers have reported strong orders.

“Those orders are a very healthy sign of what’s to come,” Hatfield said. “Those who have been strong, we see continuing to be strong as we move into next year.”

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Trader disclosure: On Dec. 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Kelly is short CREDIT SUISSE (CDR); Kelly is short UBS (UBS); Kelly is short BARCLAYS (BCS); Kelly is long ISHARES RUSSELL 2000 (IWM); Kelly is long SPYDER S&P REGIONAL BANKING INDEX (KRE); Kelly is long UNITED TECHNOLOGIES (UTX); Murphy is long AK STEEL (AKS); Murphy is long BANK OF AMERICA (BAC); Murphy is long WHIRLPOOL (WHR); Murphy is long ABERCROMBIE (ANF); Najarian has long call spreads in APPLE (AAPL); Najarian has long call spreads in AK STEEL (AKS); Najarian has long call spreads in US STEEL (X); Najarian has long call spreads in PNC FINANCIAL (PNC); Najarian has long call spreads in MICROSOFT (MSFT); Najarian has long call spreads in RIMM; Najarian has long call spreads in CNI; Najarian has long call spreads in CP; Najarian has long call spreads in NSC; Najarian is long CIGX; Najarian is long CBOE; Najarian is long CME; Najarian is long SHLD stock; Najarian is short call spreads in Sears Holdings (SHLD); Scaramucci is personal long BANK OF AMERICA (BAC); Scaramucci is personal long MCDONALDS (MCD); Scaramucci is personal long YUM BRANDS (YUM); Scaramucci is personal long CITIGROUP (C); Scaramucci is personal long GOOGLE (GOOG);

For Art Hatfield
No disclosures

For Marty Mosby
Bank of America is or was, during the 12-month period preceding the date of the distribution of this report, a client of Guggenheim Securities, LLC. Guggenheim Securities, LLC provided Bank of America non-investment banking securities-related services. Bank of America is or was during the 12-month period preceding the date of the distribution of this report a client of Guggenheim Securities, LLC or its affiliates. Guggenheim Securities, LLC or its affiliates provided Bank of Americanon-securities related services. Guggenheim Securities, LLC or its affiliates received compensation from Bank of America in the past 12 months for products or services other than for investment banking services. Guggenheim Securities, LLC or its affiliates expect(s) to receive or intend(s) to seek compensation for investment banking services from Bank of America in the next 3 months.

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