Transports Are Truckin' Ahead of Earnings

NEW YORK ( TheStreet) -- Today I profile eight transportation stocks, seven of which report quarterly results in coming weeks.

The Dow Jones Transportation Average has made quite a recovery in recent months.

Back on Nov. 16, the transports were poised for a 2012 closing low, but during that session the stock market reversed direction as investors became convinced that politicians would avert a fiscal cliff.

On Dec. 24 I wrote " Transports Shift Into Fast Lane," with the theme that even after earnings warnings the transportation sector was ripe for a technical momentum run-up.

Right now the transportation sector is not cheap, as my Web site, www.ValuEngine.com, shows the sector nearly 19% overvalued.

The Dow Jones Transportation Average ended Tuesday with a new all-time closing high at 5639.64. Some technicians call this the first condition for a Dow theory buy signal. Transports are far ahead of industrials, as the Dow Jones Industrial Average remains below its 2012 closing high of 13,610.15, set on Oct. 5.

Dow Theory has not had consistent calls since 2011, so in my judgment the Dow Jones Industrial Average needs to set a new all-time closing high above the current closing high of 14,164.53 set on Oct. 9, 2007. This would be a macro confirmation of a Dow theory buy signal.

The daily chart above of the Dow Jones Transportation Average shows an extreme overbought reading with its 12x3x3 daily slow stochastic reading at 93.56, well above the 80.00 overbought threshold on a scale of 00.00 to 100.00. My quarterly value level lags at 5094 with my annual pivot at 5469 and annual risky level at 5925. Beware of false signals, as I show an 85% chance of a return to 5469 in 2013.

Reading the Table

OV/UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by this percentage, according to ValuEngine.

VE Rating: A "1-Engine" rating is a strong sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage over the past 12 months.

Forecast One-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Price-to-earnings ratios appear elevated.

Value Level: the price at which to enter a good-'til-canceled limit order to buy on weakness. The letters mean: W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A-Annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: the price at which to enter a GTC limit order to sell on strength.

Among the eight stocks in today's profiles, four are undervalued and four are overvalued, seven have buy ratings and one has a hold rating. The performance measure shows that four have had double-digit gains over the last 12 months and shows a double-digit loss. All are projected to be higher 12 months from now. The 12-month trailing P/E ratios range from 11.9 to 23.5.

Con-Way ( CNW) ($31.36) closed Tuesday just above its 200-day SMA at $31.13 with overbought momentum. The weekly chart is positive, with the five-week MMA at $29.22 and the 200-week SMA at $32.48. The stock has a hold rating and is 18.6% undervalued. My monthly value level is $29.19, with a weekly pivot at $30.80 and a quarterly risky level at $33.43.

CSX ( CSX) ($20.78 vs. $19.95 on Dec. 24) has a positive daily chart with the stock below its 200-day SMA at $21.45. The weekly chart is positive, with the five-week MMA at $20.34 and the 200-week SMA at $19.41. The stock remains buy-rated, with my monthly value level at $19.73, weekly pivot at $21.11 and quarterly risky level at $22.31.

FedEx ( FDX) ($98.67 vs. $92.74 on Dec. 24) set a multiyear high at $98.79 on Tuesday. FDX reported its quarterly results on Dec. 19 and missed EPS estimates by 2 cents. The daily chart is extremely overbought, and the weekly chart is positive, with the five-week MMA at $93.56 and the 200-week SMA at $83.13. The stock remains buy-rated, with my monthly value level at $91.37, weekly pivot at $98.21 and semiannual risky level at $103.76.

JB Hunt Transport Services ( JBHT) ($60.90 vs. $59.20 on Dec. 24) set a new multiyear high at $62.16 on Jan. 4. The daily chart is neutral, with declining MOJO, and the weekly chart is overbought, with the five-week MMA at $59.64. The stock remains buy-rated, with my monthly value level at $58.87, my quarterly pivot at $61.22 and my semiannual risky level at $64.28.

Norfolk Southern Corp ( NSC) ($65.46 vs. $62.55 on Dec. 24) - has a positive daily chart and a positive weekly chart with the five-week MMA at $63.23 and the 200-week SMA at $60.54. The stock remains buy rated with my monthly value level at $58.81 with a weekly risky level at $67.68.

Old Dominion Freight Line ( ODFL) ($35.10 vs. $34.28 on Dec. 24) set a multiyear high at $36.25 on Jan. 10. The daily chart is neutral, with declining MOJO, and the weekly chart is overbought, with the five-week MMA at $34.29. The stock still has a buy rating. My monthly value level is at $32.96, my weekly pivot is at $35.34, and my quarterly risky level is at $36.60.

Union Pacific ( UNP) ($131.44) set a multiyear high at $132.09 on Jan. 11. The daily chart is overbought, and the weekly chart is positive, with the five-week MMA at $127.10. The stock has a buy rating, with my quarterly value level at $126.73, my monthly pivot at $129.94 and my semiannual risky level at $143.14.

United Parcel Service ( UPS) ($79.33 vs. $74.84 on Dec. 24) has an overbought daily chart and a positive weekly chart with the five-week MMA at $75.54. The stock still has a buy rating, with my quarterly value level at $74.55 and my semiannual risky level at $80.21.

At the time of publication, Suttmeier had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.