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5 Favorite Sectors This Earnings Season and Their ETFs
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The second-quarter 2024 earnings season will kick off this week, with the banking sector players due to report numbers. The overall picture ahead of this reporting cycle is one of continued resilience and a steadily improving outlook with a favorable revision trend.
Total S&P 500 earnings are expected to be up 8.6% from the year-ago period on 4.7% higher revenues, per the latest Earnings Trends. This will be the highest earnings growth rate since the 9.9% growth rate in the first quarter of 2022. Though estimates have steadily come down since the start of the quarter, the magnitude of declines was far smaller relative to the comparable periods of other recent quarters.
Of the 16 Zacks sectors, nine are expected to post earnings growth in the second quarter, with the strongest gains in the Technology sector (15.8%). This would be followed by Healthcare (19.0%), Energy (10.9%), Consumer Discretionary (12.5%) and Finance (9.0%). In particular, second-quarter earnings of the “Magnificent 7” companies are expected to be up 25.5% from the same period last year on 13.2% higher revenues (read: 5 Must-Have ETFs for the Second Half).
Earnings growth for the Energy sector is on track to turn positive in the second quarter after remaining in negative territory in the preceding four quarters.
Given this, we have highlighted an ETF each from the abovementioned sectors that could make great plays as the earnings season unfolds.
Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. It has amassed $620.3 million in its asset base and charges 29 bps in fees per year. MAGS trades in an average daily volume of 200,000 shares (read: 5 Sector ETFs That Beat the Market in Q2).
Healthcare: Health Care Select Sector SPDR Fund (XLV - Free Report)
Health Care Select Sector SPDR Fund is the most popular healthcare ETF with an AUM of $38.4 billion and an average daily volume of 6.5 million shares. It follows the Health Care Select Sector Index and holds 63 securities in its basket. Pharma takes the largest share at 32.8% from a sector look, while healthcare providers and services, healthcare equipment and supplies, biotech, and life sciences tools & services have double-digit exposure each.
Health Care Select Sector SPDR Fund charges 9 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook
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 & gas firms take the largest allocation at 37.8%, followed by Oil & Gas Exploration & Production (28.5%), Oil & Gas Refining & Marketing (11.2%), Oil & Gas Storage & Transportation (10.8%), Oil & Gas Equipment & Services (10%).
Vanguard Energy ETF has amassed $8.5 billion in its asset base and sees a good volume of about 377,000 shares. It charges 10 bps in annual fees and sports a Zacks ETF Rank #1 with a High risk outlook (read: Oil Headed for Best Week in 2 Months: Energy ETFs in Focus).
iShares U.S. Consumer Discretionary ETF offers exposure to U.S. companies that distribute food, drugs, general retail items 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 consumer discretionary, consumer services, autos & components, media & entertainment, and consumer staples distribution & retail.
iShares U.S. Consumer Discretionary ETF has amassed $1 billion in its asset base, and trades in a moderate volume of 75,000 shares a day on average. It charges 40 bps in annual fees from investors. IYC has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Finance: Financial Select Sector SPDR Fund (XLF - Free Report)
The ultra-popular Financial Select Sector SPDR Fund ETF seeks to provide exposure to 71 companies in diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It follows the Financial Select Sector Index, charging investors 9 bps in fees per year.
Financial Select Sector SPDR Fund has AUM of $40 billion and trades in an average daily volume of 37 million shares. It carries a Zacks ETF Rank #1 with a Medium risk outlook.
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5 Favorite Sectors This Earnings Season and Their ETFs
The second-quarter 2024 earnings season will kick off this week, with the banking sector players due to report numbers. The overall picture ahead of this reporting cycle is one of continued resilience and a steadily improving outlook with a favorable revision trend.
Total S&P 500 earnings are expected to be up 8.6% from the year-ago period on 4.7% higher revenues, per the latest Earnings Trends. This will be the highest earnings growth rate since the 9.9% growth rate in the first quarter of 2022. Though estimates have steadily come down since the start of the quarter, the magnitude of declines was far smaller relative to the comparable periods of other recent quarters.
Of the 16 Zacks sectors, nine are expected to post earnings growth in the second quarter, with the strongest gains in the Technology sector (15.8%). This would be followed by Healthcare (19.0%), Energy (10.9%), Consumer Discretionary (12.5%) and Finance (9.0%). In particular, second-quarter earnings of the “Magnificent 7” companies are expected to be up 25.5% from the same period last year on 13.2% higher revenues (read: 5 Must-Have ETFs for the Second Half).
Earnings growth for the Energy sector is on track to turn positive in the second quarter after remaining in negative territory in the preceding four quarters.
Given this, we have highlighted an ETF each from the abovementioned sectors that could make great plays as the earnings season unfolds.
Technology: Roundhill Magnificent Seven ETF (MAGS - Free Report)
Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. It has amassed $620.3 million in its asset base and charges 29 bps in fees per year. MAGS trades in an average daily volume of 200,000 shares (read: 5 Sector ETFs That Beat the Market in Q2).
Healthcare: Health Care Select Sector SPDR Fund (XLV - Free Report)
Health Care Select Sector SPDR Fund is the most popular healthcare ETF with an AUM of $38.4 billion and an average daily volume of 6.5 million shares. It follows the Health Care Select Sector Index and holds 63 securities in its basket. Pharma takes the largest share at 32.8% from a sector look, while healthcare providers and services, healthcare equipment and supplies, biotech, and life sciences tools & services have double-digit exposure each.
Health Care Select Sector SPDR Fund charges 9 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook
Energy: Vanguard Energy ETF (VDE - Free Report)
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 & gas firms take the largest allocation at 37.8%, followed by Oil & Gas Exploration & Production (28.5%), Oil & Gas Refining & Marketing (11.2%), Oil & Gas Storage & Transportation (10.8%), Oil & Gas Equipment & Services (10%).
Vanguard Energy ETF has amassed $8.5 billion in its asset base and sees a good volume of about 377,000 shares. It charges 10 bps in annual fees and sports a Zacks ETF Rank #1 with a High risk outlook (read: Oil Headed for Best Week in 2 Months: Energy ETFs in Focus).
Consumer Discretionary: iShares U.S. Consumer Services ETF (IYC - Free Report)
iShares U.S. Consumer Discretionary ETF offers exposure to U.S. companies that distribute food, drugs, general retail items 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 consumer discretionary, consumer services, autos & components, media & entertainment, and consumer staples distribution & retail.
iShares U.S. Consumer Discretionary ETF has amassed $1 billion in its asset base, and trades in a moderate volume of 75,000 shares a day on average. It charges 40 bps in annual fees from investors. IYC has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Finance: Financial Select Sector SPDR Fund (XLF - Free Report)
The ultra-popular Financial Select Sector SPDR Fund ETF seeks to provide exposure to 71 companies in diversified financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. It follows the Financial Select Sector Index, charging investors 9 bps in fees per year.
Financial Select Sector SPDR Fund has AUM of $40 billion and trades in an average daily volume of 37 million shares. It carries a Zacks ETF Rank #1 with a Medium risk outlook.