NEW YORK ( TheStreet) -- On Thursday FedEx ( FDX) reported fiscal third-quarter earnings that topped already optimistic expectations. Earnings per share of 76 cents were more than double the 31 cents in the year-ago quarter and topped the average analyst estimate for 72 cents. The news follows last month's fourth-quarter report from rival UPS ( UPS), where earnings increased nearly threefold from a year ago. As good as FedEx's earnings appeared to be, however, perhaps the more important element to the report was the company's outlook and guidance for the near future. After reporting strength across all divisions, FedEx raised its EPS forecast for the current fiscal year from $3.75 to $3.80. Analysts have traditionally used the health of FedEx and UPS as a barometer for the broader U.S. economy because of the volume and diversity of the goods shipped by the companies. Impressive numbers like those released Thursday provide reassurance that the domestic and global economy remain on the road to recovery. When it comes to ETFs, the best way to play FedEx and the rest of the delivery services industry is through the iShares Dow Jones Transportation Average Index ( IYT). Although IYT tracks all aspects of the U.S. transportation sector, FedEx and UPS have commanded the first and third positions since the index dropped Burlington Northern Santa Fe ( BNI) at the start of the year. Together, the two competitors command 20% of the fund. Delivery services in general account for nearly a quarter of the fund's total portfolio. This slice of the fund has nearly overtaken the rail industry, which today represents 27% of IYT. Prior to dropping BNI, railroads accounted for more than 30% of the ETF. In the past year, IYT has managed to overpower its sister index, the Dow Jones Industrial Average. This index, tracked by the SPDR Dow Jones Industrial Average ETF ( DIA), has gained more than 50% while IYT has gained nearly 80%. This outperformance has continued into 2010: Year to date, DIA and IYT are up 3% and 7%, respectively. The Fidelity Select Transportation Fund (FSRFX) is a mutual fund that also provides investors with exposure to the largest players in the transportation industry. Interestingly FSRFX lacks exposure to both FedEx and UPS, instead opting for heavy exposure to the airline industry. Airlines make up only 8% of IYT. But in FSRFX, Delta Air Lines ( DAL) alone accounts for 8%. Other airlines, including Southwest ( LUV), Pinnacle ( PNCL), UAL ( UAUA) and Continental ( CAL) can also be found among the fund's top 10 holdings.
Throughout 2010, FSRFX's heavy exposure to airline companies has helped it outperform its ETF rival considerably. Since the start of the year the fund has gained nearly 20% vs. 7% for IYT. This also beat the performance of Claymore/NYSE Arca Airline ( FAA), which is up 14%. ETF investors looking for ETF exposure to delivery services like FedEx and UPS should certainly consider IYT as a strong stable play. However, those looking for a better return in the transports arena may want to consider FSRFX. -- Written by Don Dion in Williamstown, Mass. At the time of publication, Dion was long the SPDR Dow Jones Industrial Average ETF.