Unlike many recent quarters, the transportation sector lagged in Q2 as a strong dollar ate away most of the revenues of big transporters.

This is especially true as total earnings from 98% of the sector's total market capitalization reported are up 9.4% while revenues declined 1.9%. This is much lower than Q1 earnings growth of 38.7% and revenue growth of 2% for the same period. Further, earnings surprises were predominantly weak with 58.3% of the companies beating earnings estimates and only 8.3% beating on revenues (read:ETFs to Play 3 Undervalued Sectors).

For a better understanding, let's dig into earnings results of some well-known industry players:

Transportation Earnings in Focus

The world's largest package delivery company – United Parcel Service (UPS –Analyst Report) – beat our earnings estimate by 9 cents but revenues of $14.1 billion fell shy of our estimate of $14.5 billion. The company continues to expect earnings per share of $5.05–$5.30 for fiscal 2015, representing 6–12% growth on an annual basis. The midpoint is above the Zacks Consensus Estimate of $5.18 at the time of reaffirming the guidance. In fact, FedEx stated that earnings could be on the high end of the guidance range.

Union Pacific (UNP – Analyst Report), the u.s. largest railroad, reported earnings of $1.38 per share outpacing the Zacks Consensus Estimate by four cents but revenues of $5.43 billion fell short of our estimate of $5.67 billion. Other major railroads like CSX Corp. (CSX – Analyst Report) and Kansas City Southern (KSU –Analyst Report) also missed on the revenue front. Revenues at CSX lagged the Zacks Consensus Estimate by $78 million while KSU revenues declined  by 32 million. However, CSX outpaced our earnings estimate by 3 cents and KSU met our earnings estimate of $1.03.

Ryder Systems (R – Analyst Report), the leader in supply chain management and fleet management services, topped the bottom line but lagged the top line. Earnings per share of $1.65 are above the Zacks Consensus Estimate of $1.63 while revenues of $1.66 billion were below our estimate of $1.69 billion.

The two largest U.S. airlines – Delta Air Lines (DAL – Analyst Report) and United Continental (UAL – Analyst Report) – also beat our earnings estimate by a nickel and a couple of cents, respectively. Revenues for Delta were slightly above the Zacks Consensus Estimate but below for United Continental (read: Air Stocks and ETF Plunge: Warming Up for Summer?).

Last but not the least, the leading trucking carrier – J.B. Hunt (JBHT – Analyst Report)– missed on both earnings and revenues. Earnings per share of 88 cents fell short of the Zacks Consensus Estimate by a couple of cents while revenues were $69 million below our estimate.

ETFs in Focus
Despite the string of Q2 revenue misses, transport ETFs have managed to hold up well from a one-month look and are in focus for the days ahead. Both iShares Dow Jones Transportation Average Fund (IYT –ETF report) and SPDR S&P Transportation ETF (XTN – ETF report) are up 4.2% and 2.1%, respectively. Both funds have a Zacks ETF Rank of 3 or ‘Hold' rating with a High risk outlook.