The Earnings Bar Is Hurdle for Transportation Stocks

NEW YORK (TheStreet) -- The Dow transportation average gained momentum Tuesday in a technical move towards a test of its May 20 all time high at 6,568.41. What this has done is raise the earnings bar for the transportation sector, which still has a sector allocation rating of 'avoid-source of funds.'

I profiled these eight transportation stocks I have been following in Continue to Avoid Transportation Stocks. I have not changed this June 19 assessment and thus re-iterate that transportation stocks should be sold on strength.

The transportation sector consists of 182 stocks and only six have a buy rating. We show that 96 stocks are rated sell and another 47 are rated strong sell. With 78.6% of all stocks rated sell the 'avoid-source of funds' asset allocation weighting remains appropriate. On June 19 the sector had 74.9% of stocks rated sell.

The ValuEngine valuation warning continues with 74.0% of all stocks overvalued, and with 38.6% of all stocks overvalued by 20% or more. The transportation sector is 14.6% overvalued.

In today's table, all eight stocks are overvalued, all continue to be sell-rated, and six had double-digit gains of 13.2% to 51.2% over the last 12 months. The projected losses for the next 12 months range from down 5.7% to down 9.8%. All are above their 200-day simple moving averages which risks reversion to the mean.

Reading the Table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that 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.

Forecast 1-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.

Value Level: Price at which to enter a GTC 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: Price at which to enter a GTC limit order to sell on strength.

Con-Way ( CNW) ($41.60 vs. $39.81 on June 19) set a new 52-week high at $41.87 on Tuesday. My monthly value level is $39.20 with a semiannual pivot at $41.77 and weekly risky level at $42.93.

CSX ( CSX) ($24.06 vs. $25.29 on June 19) is trading between its 200-day SMA at $22.44 and its 50-day SMA at $24.69. My quarterly value level is $17.41 with a weekly pivot at $23.41 and monthly risky level at $25.15.

FedEx ( FDX) ($103.15 vs. $99.48 on June 19) set its multi-year high at $109.66 on March 11 well before the transportation average peaked. My weekly value level is $96.78 with a semiannual pivot at $105.29 and annual risky level at $113.72.

JB Hunt Transport ( JBHT) ($76.29 vs. $72.70 on June 19) set its multi-year high at $77.20 on May 22, and this was nearly tested on Tuesday. My semiannual value level is $72.05 with a weekly pivot at $74.93 and monthly risky level at $79.03.

Norfolk Southern ( NSC) ($74.39 vs. $77.03 on June 19) is trading between its 200-day SMA at $69.71 and its 50-day SMA at $76.36. My weekly value level is $71.71 with an annual pivot at $75.90 and semiannual risky level at $77.40.

Old Dominion Freight ( ODFL) ($44.39 vs. $43.15 on June 19) set a new multi-year high at $44.63 on Tuesday. My semiannual value level is $40.38 with a monthly pivot at $42.86 and weekly risky level at $45.74.

Union Pacific ( UNP) ($159.41 vs. $157.95 on June 19) set its multi-year high at $161.00 on May 22 with a secondary high at $160.27 on Tuesday. My semiannual value level is $149.48 with a monthly pivot at $159.33 and semiannual risky level at $167.94.

United Parcel Service ( UPS) ($89.73 vs. $87.43 on June 19) set a new multi-year high at $91.04 on Tuesday. My weekly value level is $85.14 with a monthly pivot at $91.05 and semiannual risky level at $96.32.

During my drive north and then south on I 95 in mid-June truck traffic was light to moderate. I saw less then ten Conway, JB Hunt and Old Dominion trucks combined. We usually see numerous FedEx and UPS trucks, but not in mid-June. In Tampa Bay we live off U.S. Highway 41 between state road 52 and 54. U.S. 41 was the major road from Atlanta down to Miami pre-Interstate 75, and is known as Tamiami Trail south of Tampa. CSX has a rail line along our stretch of the highway, and you rarely see a train on this track.

Book profits before the trains derail and the trucks get flat tires.

At the time of publication the author held no positions in any of the 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.

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