ETFs
5 Favorite Sectors for This Earnings Season and Their ETFs
The Q2 2024 earnings season kicks off this week, with the banking sector releasing figures. The overall picture for this reporting cycle is one of continued resilience and a steady improvement in outlook, with a favorable revision trend.
According to the latest earnings trends, total S&P 500 earnings are expected to increase 8.6% from the same period last year, driven by revenues up 4.7%, which will be the highest rate of earnings growth since the 9.9% growth rate in the first quarter of 2022. While estimates have been steadily declining since the start of the quarter, the magnitude of the declines has been much smaller compared to comparable periods in other recent quarters.
Of the 16 Zacks sectors, nine are expected to post earnings growth in the second quarter, with the largest gains coming from the Technology sector (15.8%). This is followed by the Healthcare (19.0%), Energy (10.9%), Consumer Discretionary (12.5%) and Financials (9.0%) sectors. Notably, the Magnificent 7 companies are expected to see second-quarter earnings rise 25.5% from the same period last year, with revenue up 13.2% (Read: 5 Must-Hold ETFs for the Second Half).
Energy sector earnings growth is on track to turn positive in the second quarter after remaining in negative territory for the previous four quarters.
Given this, we’ve highlighted one ETF from each of the sectors mentioned above that could be a great bargain as earnings season unfolds.
Technology: Roundhill Magnificent Seven ETF (MAGS)
Roundhill Magnificent Seven ETF is the first-ever ETF to offer investors weighted exposure to the “Magnificent Seven” stocks. It has accumulated $620.3 million in assets and charges 29 bps in fees per year. MAGS trades an average of 200,000 shares per day (read: 5 Sector ETFs That Beat the Market in Q2).
Health Care: SPDR Selective Health Care Sector Fund (XLV)
The Health Care Select Sector SPDR fund is the most popular healthcare ETF, with $38.4 billion in assets under management and an average daily volume of 6.5 million shares. It tracks the Health Care Select Sector Index and holds 63 stocks in its basket. Pharmaceuticals has the largest share at 32.8% from a sector perspective, while healthcare providers and services, healthcare equipment and supplies, biotechnology, and life sciences tools and services each have double-digit exposure.
The Health Care Select Sector SPDR fund charges 9 bps in annual fees and is ranked #1 (Strong Buy) on Zacks ETF with an average risk outlook.
Energy: Vanguard Energy ETF (VDE)
The Vanguard Energy ETF provides exposure to a basket of 115 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. Integrated oil and gas companies account for the largest market share at 37.8%, followed by oil and gas exploration and production (28.5%), oil and gas refining and marketing (11.2%), oil and gas storage and transportation (10.8%), and oil and gas equipment and services (10%).
The Vanguard Energy ETF has accumulated $8.5 billion in assets and has a large volume of about 377,000 shares. It charges 10 bps in annual fees and ranks as the top Zacks ETF with a high risk outlook (read: Oil Headed for Best Week in 2 Months: Energy ETFs in Focus).
Consumer Discretionary: iShares US Consumer Services ETF (JIJ)
The iShares US Consumer Discretionary ETF provides exposure to U.S. companies that distribute food, drugs, consumer goods and media by tracking the Russell 1000 Consumer Disc 40 Act 15/22.5 Daily Capped Index. It holds 176 stocks in its basket, with key holdings in the consumer discretionary, consumer services, automotive and components, media and entertainment, and consumer staples distribution and retail sectors.
The iShares US Consumer Discretionary ETF has accumulated $1 billion in assets and trades on average in volume of 75,000 shares per day. It charges investors 40 bps in annual fees. IYC has a Zacks ETF Rank #3 (Hold) with a medium risk outlook.
Finance: Selected Financial Sector SPDR Funds (XLF)
The popular Financial Select Sector SPDR Fund ETF seeks to provide exposure to 71 companies in the diversified financial services, insurance, banking, capital markets, mortgage real estate investment trusts, consumer finance, and savings and mortgage finance sectors. It tracks the Financial Select Sector Index, charging investors 9 bps in fees per year.
The Financial Select Sector SPDR fund has $40 billion in assets under management and trades an average of 37 million shares per day. It is ranked #1 on Zacks ETFs with an average risk outlook.
The story continues
Want to know the latest recommendations from Zacks Investment Research? Download the 7 Best Stocks for the Next 30 Days today. Click to get this free report
ETF SPDR Financial Select Sector (XLF): ETF Research Reports
ETF Health Care Select Sector SPDR (XLV): ETF Research Reports
Vanguard Energy ETF (VDE): ETF Research Reports
iShares US Consumer Discretionary ETF (IYC): ETF Research Reports
Roundhill Magnificent Seven ETF (MAGS): ETF Research Reports