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The first-quarter 2023 earnings season will kick off this week, with the banking sector slated to report numbers. There has been a deceleration in the earnings outlook in recent months, with negative revisions for several key sectors since the start of the first quarter.
Total S&P 500 earnings are expected to be up 2.5% from the same period last year on 3.5% higher revenues, per the latest Earnings Trends. This would follow 6.7% earnings growth in the fourth quarter on 3.9% higher revenues. Though estimates have steadily come down since the quarter began, the magnitude of cuts compared favorably with the recent periods. In fact, the estimates have come down for 10 of the 16 Zacks sectors (read: 5 Market-Beating Sector ETFs of Q1).
Of the 16 Zacks sectors, eight are expected to post earnings growth in the first quarter, with the strongest gains in the Technology sector (19.5%). This would be followed by retail (13.4%), Consumer Discretionary (11.3%%), Utilities (7%) and Construction (4.5%).
Given this, we have highlighted one ETF from the abovementioned sectors that could make great plays as the earnings season unfolds. These ETFs have a favorable Zacks ETF Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold).
Technology: Technology Select Sector SPDR Fund (XLK - Free Report)
Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 65 securities in its basket, with a heavy concentration on the top two firms — Microsoft (MSFT - Free Report) and Apple (AAPL - Free Report) . XLK has key holdings in software, semiconductors & semiconductor equipment, and technology hardware, storage & peripherals.
Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with AUM of $65 billion and an average daily volume of 7 million shares. The fund charges 9 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook.
SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds 79 well-diversified stocks in its basket, with none making up for more than 1.8% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, specialty retail, and broadline retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $415.2 million and an average trading volume of 7 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETFs to Gain & Lose From Higher Oil Price).
Vanguard Consumer Discretionary ETF follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds 306 stocks in its basket with concentrated exposure on the top two firms. In terms of industrial exposure, broadline retail, automobile manufacturers and restaurants occupy the top three spots.
Vanguard Consumer Discretionary ETF is a low-cost choice in the space, charging investors 10 bps in annual fees while volume is good at nearly 66,000 shares a day. The fund has managed $5.5 billion in its asset base so far. Vanguard Consumer Discretionary ETF has a Zacks ETF Rank #1 with a Medium risk outlook.
Utilities: Vanguard Utilities ETF (VPU)
Vanguard Utilities ETF follows the MSCI US Investable Market Utilities 25/50 Index, holding 65 securities in its basket, with none accounting for more than 11% share. More than half of the portfolio is allocated to electric utilities, closely followed by multi utilities (26%) (read: 3 Safe-Haven ETFs to Add Health to Your Portfolio Now).
Vanguard Utilities ETF charges 10 bps in annual fees and sees a good volume of around 253,000 shares on average. It has AUM of $5 billion and a Zacks ETF Rank #1 with a Medium risk outlook.
Construction: iShares U.S. Home Construction ETF (ITB - Free Report)
iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index (read: 5 Reasons to Buy Housing ETFs Now).
With an AUM of $3.1 billion, iShares U.S. Home Construction ETF holds a basket of 46 stocks, with a heavy concentration on the top two firms. The product charges 40 bps in annual fees and trades in a heavy volume of around 2 million shares a day, on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #3 with a High risk outlook.
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5 Favorite Sector ETFs of Q1 Earnings
The first-quarter 2023 earnings season will kick off this week, with the banking sector slated to report numbers. There has been a deceleration in the earnings outlook in recent months, with negative revisions for several key sectors since the start of the first quarter.
Total S&P 500 earnings are expected to be up 2.5% from the same period last year on 3.5% higher revenues, per the latest Earnings Trends. This would follow 6.7% earnings growth in the fourth quarter on 3.9% higher revenues. Though estimates have steadily come down since the quarter began, the magnitude of cuts compared favorably with the recent periods. In fact, the estimates have come down for 10 of the 16 Zacks sectors (read: 5 Market-Beating Sector ETFs of Q1).
Of the 16 Zacks sectors, eight are expected to post earnings growth in the first quarter, with the strongest gains in the Technology sector (19.5%). This would be followed by retail (13.4%), Consumer Discretionary (11.3%%), Utilities (7%) and Construction (4.5%).
Given this, we have highlighted one ETF from the abovementioned sectors that could make great plays as the earnings season unfolds. These ETFs have a favorable Zacks ETF Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold).
Technology: Technology Select Sector SPDR Fund (XLK - Free Report)
Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 65 securities in its basket, with a heavy concentration on the top two firms — Microsoft (MSFT - Free Report) and Apple (AAPL - Free Report) . XLK has key holdings in software, semiconductors & semiconductor equipment, and technology hardware, storage & peripherals.
Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with AUM of $65 billion and an average daily volume of 7 million shares. The fund charges 9 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook.
Retail: SPDR S&P Retail ETF (XRT - Free Report)
SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds 79 well-diversified stocks in its basket, with none making up for more than 1.8% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, automotive retail, specialty retail, and broadline retail.
SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $415.2 million and an average trading volume of 7 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETFs to Gain & Lose From Higher Oil Price).
Consumer Discretionary: Vanguard Consumer Discretionary ETF (VCR - Free Report)
Vanguard Consumer Discretionary ETF follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds 306 stocks in its basket with concentrated exposure on the top two firms. In terms of industrial exposure, broadline retail, automobile manufacturers and restaurants occupy the top three spots.
Vanguard Consumer Discretionary ETF is a low-cost choice in the space, charging investors 10 bps in annual fees while volume is good at nearly 66,000 shares a day. The fund has managed $5.5 billion in its asset base so far. Vanguard Consumer Discretionary ETF has a Zacks ETF Rank #1 with a Medium risk outlook.
Utilities: Vanguard Utilities ETF (VPU)
Vanguard Utilities ETF follows the MSCI US Investable Market Utilities 25/50 Index, holding 65 securities in its basket, with none accounting for more than 11% share. More than half of the portfolio is allocated to electric utilities, closely followed by multi utilities (26%) (read: 3 Safe-Haven ETFs to Add Health to Your Portfolio Now).
Vanguard Utilities ETF charges 10 bps in annual fees and sees a good volume of around 253,000 shares on average. It has AUM of $5 billion and a Zacks ETF Rank #1 with a Medium risk outlook.
Construction: iShares U.S. Home Construction ETF (ITB - Free Report)
iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index (read: 5 Reasons to Buy Housing ETFs Now).
With an AUM of $3.1 billion, iShares U.S. Home Construction ETF holds a basket of 46 stocks, with a heavy concentration on the top two firms. The product charges 40 bps in annual fees and trades in a heavy volume of around 2 million shares a day, on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #3 with a High risk outlook.