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Transports Outperform, But Some Moves Lack Conviction

Transports have perked up in recent weeks, but the sector is a big one, filled with leading and lagging sub-groups. Equipment manufacturers in the sector soared Wednesday but there’s not much leadership in the group. Same with shipping and railroad stocks which also turned in a solid performance the same day. Year-to-date, the Dow Transports are up 6% compared to a gain of around 1.6% for the S&P 500. Is the sector pricing in better times ahead for the U.S. economy? Maybe, maybe not, but several stocks in the sector bear watching due to favorable technical setups. UPS ( UPS ) is setting up in a cup-with-handle base with a 106.71 buy point ahead of its April 28 earnings report. A solid report could be in store if results from competitor FedEx ( FDX ) are an indication. FedEx is showing equally strong technical action, trading tightly after soaring 13% in huge volume during the week ended March 18. A strong earnings report was the catalyst. FedEx Ground was one of the main bright spots in the quarter, with revenue up 30% to $4.41 billion. FedEx is a bit of an anomaly, however, because its big weekly gain in mid-March was a clear sign of institutional buying, something that’s been missing in several other transport names. IBD’s airline group has held on to a lofty rank in IBD’s 197 Industry Group Rankings, helped by strong price performance over the past six months. Several names in the group continue to show relative strength, but two names holding above recent buy points haven’t seen much conviction behind the buying. Alaska Air ( ALK ) is near the high end of buy range from a prior 78.59 cup-with-handle buy point, but the breakout came in tepid volume. Alaska Air recently added a new handle with an 83.19 entry so new buyers might want to wait for the possibility of a fresh breakout in heavy volume. Southwest ( LUV ) is still in buy range from a 45.49 cup-with-handle entry, but it was a tepid breakout as well. Earnings are due April 21 before the open. Among logistics firms, C.H. Robinson Worldwide ( CHRW ) and Expeditors International ( EXPD ) are holding above recent buy points but their breakouts also came in soft trade. The problem with low-volume breakouts is that they generally make for a weak foundation. Some can work, but plenty of others will run out of steam quickly. Institutional buying makes for a stronger foundation, not only for individual stocks but for the major averages as well. Among trucking firms. J.B. Hunt ( JBHT ) is flirting with a breakout from a long cup-with-handle base with an 87.04 buy point. It looks a little better than the aforementioned names because of a recent Accumulation/Distribution of A- and up/down volume ratio of 1.5. Both data points indicate institutional buying in recent weeks.

Netflix Seen Posting Lowest EPS In Over 3 Years Next Week

With Netflix ( NFLX ) investing heavily in its global expansion, Wall Street is expecting the Internet TV service to report its lowest earnings per share in over three years when it posts first-quarter results after the close Monday. Analysts polled by Thomson Reuters expect Netflix to earn 3 cents a share in Q1, down 40% from the year-earlier quarter. That would be the company’s lowest EPS total since the fourth quarter of 2012, when it reported 2 cents in earnings per share. Netflix sales are seen rising 25% to $1.965 billion in the March quarter when it completed its international expansion, excluding China. Analysts don’t see EPS growth returning at Netflix until the fourth quarter. For the next several quarters, the focus of investors will be on subscriber growth and whether Netflix can continue to add new customers at a quick pace. In the December quarter, Netflix added 5.59 million new streaming subscribers, bringing its total to 74.76 million subscribers worldwide. Netflix added 1.56 million U.S. streaming subscribers and 4.04 million international subscribers in Q4. For the March quarter, Netflix forecast 6.1 million new streaming subscribers for a global total of 80.86 million. The Los Gatos, Calif.-based company is targeting 1.75 million new U.S. streaming subscribers and 4.35 million new international subscribers. RBC Capital Markets analyst Mark Mahaney on Friday reiterated his outperform rating on Netflix stock with a price target of 140. Netflix stock was up nearly 1%, above 111, in afternoon trading on the stock market today . “Based on intra-quarter data points, our proprietary survey work, and our model sensitivity work, we believe Street revenue/EPS estimates for Q1 are reasonable,” Mahaney said in a research report. “For the Q2 guide, we believe the Street’s outlook for roughly 600,000 domestic subscriber adds may be slightly aggressive, given uncertainty over pending price increases. But we view the Street’s international subscriber adds outlook of 2.9 million for Q2 as realistic.” Some Analysts Skeptical Of Netflix’s Prospects Other analysts are more cautious ahead of Netflix’s Q1 earnings release. In a report Friday, Mizuho Securities analyst Neil Doshi maintained his neutral rating on Netflix with price target of 120. While expectations are generally positive ahead of Netflix’s Q1 report, Doshi is concerned about the company’s continued free cash flow losses and whether it can successfully scale local original content in new international markets. FBR analyst Barton Crockett maintained his market perform rating and price target of 100. Netflix’s Q1 report “is likely to feature healthy but decelerating subscriber growth in the U.S. and a record level of growth internationally, powered by new country launches and very robust growth in Latin America,” Crockett said in a report Friday. However, Netflix’s growth appears to be plateauing in developed markets where Netflix has been available for some time, such as the U.S., U.K. and Canada, he said. “We suspect that similar maturity will arrive over the next couple of years in other developed country markets,” Crockett said. “We also believe that some investors may be overly optimistic about the degree of flow-through in second-half 2016 from U.S. price hikes.” RELATED: Netflix Stock Surges Ahead Of Q1 Earnings Report Next Week Netflix Rate Hike To Be Key Test Of Its Pricing Power

Amazon, Alphabet Extend Breakouts Ahead Of Earnings

Two Internet bigwigs — Amazon ( AMZN ) and Google parent Alphabet ( GOOGL ) — are extending their breakouts Friday ahead of both companies’ first-quarter earnings reports next week. Alphabet shares continued a slight ascent into the lower end of buy range following a breakout from a cup-with-handle base with 777.41 buy point, and remain well above their 50-day and 200-day lines. Alphabet rose 0.3% to 778 on the stock market today  in afternoon trade. The company will report Q1 results on April 21 after the close. IBD’s Take: How healthy are Alphabet and Amazon stocks — and how do they compare vs. rivals? Find out at IBD Stock Checkup Amazon edged higher Friday afternoon, remaining solidly in buy territory after clearing a 603.34 buy point from a double-bottom-with-handle base at the start of the week. The stock is 10% off its Dec. 29 high of 696.44. Expect the e-commerce giant to report Q1 earnings after market close on April 28. Both stocks are trading in below-average volume Friday. In other FANG news, Facebook ( FB ) is slipping toward its 50-day line as it droops out of a cup-with-handle base. Facebook fell 1.1% intraday. And Netflix ( NFLX ) shares aren’t budging much so far Friday, remaining above their 200-day level as they form a cup-shaped base. Netflix reports earnings on Monday. RELATED: Netflix, Amazon Are Into Indies Now — And That’s Good For Theaters Alphabet, Microsoft Join Amazon As Market Leaders; Breakout Soon? Apple, Facebook, Nike, Amazon Lead Morgan Stanley’s 3-Year Picks