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6 Sector ETFs to Play for Revenue Growth Potential in Q1
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The first-quarter (Q1) earnings reporting cycle is round the corner. Investors have already shifted their focus from the Fed, banks and Russia and put emphasis on earnings releases. Bottom line may be investors’ top focus amid an earnings season, but top line probably tells you more about the inherent strength of a company.
Why to Follow Revenue Growth This Reporting Cycle?
For Q1, total earnings are expected to decline 10% from the same period last year on 1.8% higher revenues as per the Earnings Trends issued on Apr 5, 2023. Earnings growth will likely trail revenue growth in the coming two quarters. For Q1, 11 out of the Zacks classified 16 sectors of the S&P 500 will likely witness an expansion in revenues while only six sectors are likely to report earnings growth.
Further, investors should note that sales are harder to be influenced in an income statement than earnings. A company can land up on decent earnings numbers by adopting cost-cutting or some other measures that do not speak for its core strength. But it is harder for a company to mold its revenue figure.
Below, we highlight five sectors and their related ETFs that could be used to book some profits on revenue growth potential.
The sector is expected to expand 15.0% in Q1 followed by 14.4% expansion in Q4. The consumer sentiment too improved lately on the year-over-year basis. The U.S. Index of Consumer Sentiment is at a current level of 62.00, down from 67.00 last month and up from 59.40 one year ago. This is a change of -7.46% from last month and 4.38% from one year ago. The monthly decline in sentiments happened due to the banking crisis in March. If the banking chaos settles in the near term. Sentiment may improve ahead.
The sector is expected to witness revenue growth of 13.2% in Q1, after 24.4% growth in Q4. Decent sales of Motor Vehicle & Parts and the price inflation of new cars have been palpable. Both factors indicate that the business conditions remained favorable for the auto industry.
The sector is expected to record 7.6% revenue growth in Q1, following 12.5% expansion in the previous quarter. Rising geopolitical tensions, rising M&A activities, comeback of Boeing and cheaper valuation should support the sector (read: 4 Reasons Behind the Strength of Aerospace & Defense ETFs).
As the economic activities have been gaining steam from the Covid-19-led slump, transportation sector has fallen into a sweet spot. The sector is expected to record 5.9% revenue growth in Q1, following 9% expansion in the previous quarter.
Industrial activities have been in decent shape. Growing employment in manufacturing sector calls for that strength. The sector is expected to witness revenue growth of 5.7% in Q1 revenues, after 9.7% growth in Q4.
The sector is expected to witness revenue growth of 7.0% in Q1 revenues, after 8.6% growth in Q4. Being a low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is thus, considered a defensive investment or a safe haven amid economic or political turmoil.
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6 Sector ETFs to Play for Revenue Growth Potential in Q1
The first-quarter (Q1) earnings reporting cycle is round the corner. Investors have already shifted their focus from the Fed, banks and Russia and put emphasis on earnings releases. Bottom line may be investors’ top focus amid an earnings season, but top line probably tells you more about the inherent strength of a company.
Why to Follow Revenue Growth This Reporting Cycle?
For Q1, total earnings are expected to decline 10% from the same period last year on 1.8% higher revenues as per the Earnings Trends issued on Apr 5, 2023. Earnings growth will likely trail revenue growth in the coming two quarters. For Q1, 11 out of the Zacks classified 16 sectors of the S&P 500 will likely witness an expansion in revenues while only six sectors are likely to report earnings growth.
Further, investors should note that sales are harder to be influenced in an income statement than earnings. A company can land up on decent earnings numbers by adopting cost-cutting or some other measures that do not speak for its core strength. But it is harder for a company to mold its revenue figure.
Below, we highlight five sectors and their related ETFs that could be used to book some profits on revenue growth potential.
Consumer Discretionary – Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
The sector is expected to expand 15.0% in Q1 followed by 14.4% expansion in Q4. The consumer sentiment too improved lately on the year-over-year basis. The U.S. Index of Consumer Sentiment is at a current level of 62.00, down from 67.00 last month and up from 59.40 one year ago. This is a change of -7.46% from last month and 4.38% from one year ago. The monthly decline in sentiments happened due to the banking crisis in March. If the banking chaos settles in the near term. Sentiment may improve ahead.
Autos – First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report)
The sector is expected to witness revenue growth of 13.2% in Q1, after 24.4% growth in Q4. Decent sales of Motor Vehicle & Parts and the price inflation of new cars have been palpable. Both factors indicate that the business conditions remained favorable for the auto industry.
Aerospace – iShares U.S. Aerospace & Defense ETF (ITA - Free Report)
The sector is expected to record 7.6% revenue growth in Q1, following 12.5% expansion in the previous quarter. Rising geopolitical tensions, rising M&A activities, comeback of Boeing and cheaper valuation should support the sector (read: 4 Reasons Behind the Strength of Aerospace & Defense ETFs).
Transportation – SPDR S&P Transportation ETF (XTN - Free Report)
As the economic activities have been gaining steam from the Covid-19-led slump, transportation sector has fallen into a sweet spot. The sector is expected to record 5.9% revenue growth in Q1, following 9% expansion in the previous quarter.
Industrials – Industrial Select Sector SPDR ETF (XLI - Free Report)
Industrial activities have been in decent shape. Growing employment in manufacturing sector calls for that strength. The sector is expected to witness revenue growth of 5.7% in Q1 revenues, after 9.7% growth in Q4.
Utilities – Utilities Select Sector SPDR ETF (XLU - Free Report)
The sector is expected to witness revenue growth of 7.0% in Q1 revenues, after 8.6% growth in Q4. Being a low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is thus, considered a defensive investment or a safe haven amid economic or political turmoil.