According to the latest Earnings Preview, total earnings and revenues for companies in the S&P 500 space are projected to expand 14.1% and 8.2%, on a year-over-year basis, at the end of the current earnings season.In fact, both the figures compare favorably with the readings in Q3, when bottom line expanded 6.7% and revenues grew 5.8%. The progress in the quarterly performance can be attributed to an improved job market, among other factors.

With the overall scenario so bright, it is of little wonder that 14 of the 16 Zacks sectors are projected to end the reporting cycle with earnings growth. Of these, one is the widely-diversified Zacks Transportation sector. The bottom line for this sector is projected to increase 3.3% compared with the year-over-year decline of 13.9% in preceding quarter.

Transports Bounce Back

Stocks in the transportation space seem to be back in favor, after being laid low for the most of 2017 due to multiple headwinds like the back-to-back hurricanes. Also, the new tax law (Tax Cuts and Jobs Act) is a huge positive for the companies in this space. Notably, the $1.5 trillion tax overhaul signed into law by President Trump on Dec 22, 2017 reduces corporate taxes significantly. This is likely to boost cash flow, which in turn will aid earnings of transportation stocks.

Apart from the significant drop in corporate tax rate, the new law allows these companies to deduct capital expenditures from taxable income in the year of their occurrence. This aspect hugely favors transportation stocks as these invest substantially in capital expenditures. In fact, many sector participants have declared bonuses for their employees recently, thus highlighting their optimism pertaining to the new law.

Given the buoyance in the sector, key players like American Airlines (AAL) and Norfolk Southern (NSC) have reported better-than-expected earnings and revenues in Q4.

Moreover, the likes of Norfolk Southern and Alaska Air Group (ALK) have announced hikes in their respective quarterly dividend payouts recently. This signifies their financial prosperity and shareholder-friendly attitude.