Trading Nation

Three transports stocks to watch as earnings season gains speed

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C.H. Robinson stock is one to watch as transports earnings pick up steam: Trader

Transports earnings are out in force this week.

Rail company CSX kicked it off after the bell Wednesday, reporting an earnings beat and authorizing $5 billion for share buybacks. American Airlines, Southwest and Union Pacific will report Thursday morning.

Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management, is steering clear of the airlines. However, he does see opportunity in delivery company UPS, which will report Oct. 28.

UPS has "great management," Bapis told CNBC's "Trading Nation" on Wednesday, specifically crediting Carol Tome since she assumed the role of CEO in June. "Fundamentally also, they have a strong balance sheet ... and we think they are positioned to carry this new e-commerce development forward."

UPS is the second-best performer on the IYT technology ETF this year, behind FedEx. Shares have risen nearly 50% in 2020.

Bapis also points to Union Pacific as a standout transports stock, highlighting its 2% dividend yield and reasonable price-to-earnings ratio as two pros. Union Pacific has gained 10% in 2020, outpacing the IYT ETF's 6% gain.

Todd Gordon, founder of TradingAnalysis.com, is drilling down into the air freight and logistics sub-industry for opportunity.

"What I'm doing is backing into C.H. Robinson. It's considered an integrated freight and logistics [company]. It's got a 2% yield ... and it's trading only 24 times next year's earnings," Gordon said during the same "Trading Nation" segment.

C.H. Robinson is set to report earnings on Tuesday. Analysts surveyed by FactSet expect profit to drop to 97 cents a share in the three months to September, down from $1.07 a year earlier.

"The truckload volumes for this quarter are expected to be weak, but again the air freight shipping activity was strong in Q2. Could continue. And then another thing of note, which is interesting, one of their major customers is Generac. ... I know as a homeowner trying to beef up your house in this new normal, Generac is way behind in terms of long lines to have a generator installed, so watch out for that one," said Gordon.

Disclosure: Bapis and Vios hold shares in UPS. Vios holds shares in Union Pacific.

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