The Zacks Transportation sector is widely diversified in nature, including airlines, railroads, package delivery companies and truckers, to name a few. Per the latest Earnings Outlook, first-quarter 2026 earnings of the S&P 500 members of the sector are expected to increase 6.6% year over year. Revenues are estimated to be up 3.7%.
With a vast majority of players from this diversified sector yet to report their financial numbers, we expect the likes of Union Pacific Corporation UNP, Expeditors International of Washington EXPD and GXO Logistics GXO to report better-than-expected earnings despite headwinds like high fuel costs induced by the Iran war, tariff-induced uncertainty, inflation-related woes and supply-chain disruptions.
The ongoing conflict in the Middle East has resulted in a sharp jump in oil prices, which were up more than 50% in March itself, sending shockwaves worldwide. Traffic in the critical shipping route, the Strait of Hormuz (significant percentages of the world's total oil and liquefied natural gas pass through it daily), has been highly affected ever since the war began. High fuel costs are naturally hurting the bottom line of transportation stocks. This is because fuel expenses represent a key input cost for a transportation company.
Despite the oil price-led headwind, there are factors that are likely to have boosted the sector participants’ first-quarter performance. Let's delve deep.
The recovery in the freight scenario is a huge positive and should boost first-quarter 2026 results of railroads, freight forwarders and other sectoral players dependent on freight. Highlighting improving freight demand, the Cass Freight Shipments Index gained 3% month-to-month in March 2026.
The ongoing cost-control efforts are expected to have contributed to improved profitability. The continued strength of e-commerce remains a key tailwind for the sector. For airline stocks in the sector, bookings have remained strong, leading to the expectation that air-travel demand strength would, in all likelihood, offset the negative effects of high fuel costs, in turn aiding results. The increasing ticket prices are likely to cover the double-digit increase in this key input cost for transportation players.
Shipping companies are also showing resilience in the face of inflation, trade tensions and supply-chain disruptions, particularly those focused on operational efficiency and strategic growth initiatives.
Given this backdrop, we have zeroed in on three transportation companies likely to beat the Zacks Consensus Estimate for earnings in their upcoming releases. However, the task of selecting potential outperformers is not easy, given that the sector is densely populated.
How to Identify Potential Outperformers?
With several transportation firms thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver better-than-expected earnings. While it is impossible to be sure about such outperformers, our proprietary methodology makes the task fairly simple.
Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for determining stocks that have the best chances to surprise with their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our Choices
Headquartered in Omaha, NE, Union Pacific operates a rail network spanning 23 states across the western two-thirds of the United States, serving as a vital component of the global supply chain. The railroad operator currently has an Earnings ESP of +0.24% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is scheduled to report its first-quarter 2026 results on April 23. Union Pacific’s efforts to reward its shareholders through dividends and share buybacks are commendable. With the freight scene on the mend, the company’s performance is likely to have been aided. The company’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters (missing the mark on the other two occasions), with the average miss being 1.34%.
Union Pacific Corporation Price and EPS Surprise
Union Pacific Corporation price-eps-surprise | Union Pacific Corporation Quote
Expeditors, a leading third-party logistics provider, is based in Seattle, WA. EXPD currently has an Earnings ESP of +1.25% and a Zacks Rank of 3. The company is scheduled to report first-quarter 2026 results on May 5.
The improvement in the freight scene and cost-cutting efforts are likely to boost Expeditors’ first-quarter results. EXPD’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 10.08%.
Expeditors International of Washington Price and EPS Surprise
Expeditors International of Washington, Inc. price-eps-surprise | Expeditors International of Washington, Inc. Quote
GXO Logistics, a pure-play contract logistics provider, is headquartered in Greenwich, CT. The company currently has an Earnings ESP of +2.81% and a Zacks Rank of 3. GXO is slated to report first-quarter 2026 results on May 5.
Increased e-commerce, automation and outsourcing are likely to aid the company’s results. Cost-cutting efforts are also likely to have boosted the bottom-line performance of GXO. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with the average beat being 4.86%.
GXO Logistics Price and EPS Surprise
GXO Logistics, Inc. price-eps-surprise | GXO Logistics, Inc. Quote
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Union Pacific Corporation (UNP): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).