ETFs
5 Sector ETFs to Bet on Q1 Revenue Growth – May 13, 2024
The first quarter (Q1) results publication cycle is coming to an end. Although investors’ primary focus is on the bottom line, financial results likely say more about a company’s inherent strength.
Profit trends published on May 8, 2024, 88% of S&P 500 companies have reported 5% earnings growth and 4.2% revenue growth so far in the first quarter. In the first quarter, 12 of the 16 Zacks-ranked sectors in the S&P 500 saw revenue growth year-to-date, while 11 sectors reported earnings growth.
Additionally, investors should note that it is more difficult to influence sales on an income statement than profits. A company can achieve decent results by adopting cost cuts or other measures that do not speak to its fundamental strength. But it is more difficult for a company to determine its turnover.
Below, we highlight five sectors and their associated ETFs that could be used to profit on revenue growth.
Focus on sector ETFs
Retail – SPDR S&P Retail ETF (XRT – Free report)
The sector’s revenues rose 7.4% in the first quarter on profit growth of 55.2%. In any case, the sector is doing quite well. Employment growth in the sector continued its upward trend in April (+20,000). Over the previous 12 months, the industry created an average of 7,000 jobs per month.
Finance – SPDR ETFs for Select Financial Sectors (XLF – Free report)
The sector’s revenues rose 7.2% in the first quarter on profit growth of 11.6%. The tightening of the yield curve in the first quarter of this year likely benefited banks’ net interest margins. Improving investment banking (IB) activities and strong loan balances at some banks boosted revenues at some banks during the quarter.
Aerospace – iShares US Aerospace & Defense ETF (ITA – Free report)
The sector’s revenues rose 7% in the first quarter on profit growth of 7.4%. The aerospace and defense sector is one to watch in recent times, given escalating geopolitical tensions and depleting weapons stockpiles. Additionally, increasing merger and acquisition activities and lower valuation are favorable to the sector.
Construction – Invesco Building and Construction ETF (PKB – Free report)
The sector reported revenue growth of 7% in the first quarter on a profit rise of 12.6%. Activities remained strong in the space. In April, employment in construction (+9,000), after an increase of 40,000 in March. Over the previous 12 months, construction had created an average of 22,000 jobs per month.
Technology – Sector SPDR ETF Selected for Technology (XLK – Free report)
The sector reported revenue growth of 6.7% in the first quarter on the back of a 23.2% profit increase. The continued emergence of AI, machine learning, and IoT as well as increasing cloud-based revenues have likely contributed to the industry’s revenue stream.
Want key ETF news sent straight to your inbox?
The free Zacks Funds Newsletter will bring you top news, analysis, and top-performing ETFs every week.