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Q2 Earnings on Track to Reach Record Highs: ETFs to Tap
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Second-quarter earnings for the S&P 500 are expected to reach a two-year high. According to the Earnings Trends report, the picture emerging from the second-quarter earnings season continues to be one of steady improvement and resilience, with a favorable revision trend.
Total S&P 500 earnings are expected to be up 8.5% from the year-ago period on 4.7% higher revenues. This will be the highest earnings growth rate since the 10% growth rate in the first quarter of 2022. Also, the absolute level of aggregate earnings for the period is on track to be a new all-time quarterly record.
The earnings and revenue growth rates represent a modest acceleration from the other recent periods. 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.
The earnings strength seems broad-based, with nine of the 16 Zacks sectors likely to enjoy positive earnings growth. The technology sector remains a key growth driver with expected earnings growth of 15.7%, followed by healthcare (17.4%), consumer discretionary (12.3%), finance (8.3%) and energy (7.4%). Other sectors, such as retail, business services, utilities, and construction, are also expected to see notable year-over-year growth (read: 5 Favorite Sectors This Earnings Season and Their ETFs).
Given the strong earnings momentum, many investors would want to bet on earnings-focused ETFs.
Why Earnings-Focused ETFs?
Earnings are the most important driver of a stock’s performance over a longer period. This is because earnings are the lifeblood of any business, determining its ability and strength along with its growth prospects. Earnings-producing companies generally catch investors’ eye due to their solid financial position and growth potential, thereby leading to higher stock prices.
Thus, earnings-weighted ETFs have the potential to move higher relative to any other product in the earnings growth period. As a result, tilting toward this key metric is a sensible choice at present. For investors seeking to do this, there is a small lineup of U.S.-focused ETFs that accomplish this task.
Below, we have highlighted a few ETFs that could be great choices for investors seeking to make money, focusing on one of the most important aspects of stock investing.
WisdomTree U.S. LargeCap Index provides exposure to earnings-generating companies within the large-cap segment of the broad U.S. stock market by tracking the WisdomTree U.S. LargeCap Index. Holding 501 stocks in its basket, the fund is well spread out across each component, with each having less than 6% share. Additionally, WisdomTree U.S. LargeCap Index has exposure to a number of sectors, with information technology, financials, communication services and healthcare taking double-digit exposure each.
The ETF has amassed $949.7 million in its asset base and charges 8 bps in annual fees. Volume is light, trading around 42,000 shares a day. EPS has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 Must-Have ETFs for the Second Half).
WisdomTree U.S. MidCap Fund tracks the WisdomTree U.S. MidCap Index, providing exposure to 544 earnings-generating mid-cap companies. The fund is widely spread out across each component as each holds less than 1% of assets. It also has diverse exposure across various sectors like financials, industrials and consumer discretionary, which receive double-digit allocation each.
WisdomTree U.S. MidCap Fund charges 38 bps in fees per year while trading in an average daily volume of nearly 24,000 shares. It has $756.2 million in AUM and a Zacks ETF Rank #3 with a Medium risk outlook.
WisdomTree U.S. SmallCap Fund targets earnings-generating small-cap companies by tracking the WisdomTree U.S. SmallCap Index. Holding 894 stocks in its basket, it provides a nice balance across various securities as each firm holds less than 1% share in the basket. From a sector look, financials takes the largest share at 26.3% of assets while consumer discretionary, industrials, and information technology round off the next spots with double-digit exposure each (read: Here's Why You Should Bet on Beaten-Down Small-Cap ETFs).
WisdomTree U.S. SmallCap Fund has amassed $580.2 million in its asset base and sees a moderate volume of around 29,000 shares per day. It charges 38 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
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Q2 Earnings on Track to Reach Record Highs: ETFs to Tap
Second-quarter earnings for the S&P 500 are expected to reach a two-year high. According to the Earnings Trends report, the picture emerging from the second-quarter earnings season continues to be one of steady improvement and resilience, with a favorable revision trend.
Total S&P 500 earnings are expected to be up 8.5% from the year-ago period on 4.7% higher revenues. This will be the highest earnings growth rate since the 10% growth rate in the first quarter of 2022. Also, the absolute level of aggregate earnings for the period is on track to be a new all-time quarterly record.
The earnings and revenue growth rates represent a modest acceleration from the other recent periods. 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.
The earnings strength seems broad-based, with nine of the 16 Zacks sectors likely to enjoy positive earnings growth. The technology sector remains a key growth driver with expected earnings growth of 15.7%, followed by healthcare (17.4%), consumer discretionary (12.3%), finance (8.3%) and energy (7.4%). Other sectors, such as retail, business services, utilities, and construction, are also expected to see notable year-over-year growth (read: 5 Favorite Sectors This Earnings Season and Their ETFs).
Given the strong earnings momentum, many investors would want to bet on earnings-focused ETFs.
Why Earnings-Focused ETFs?
Earnings are the most important driver of a stock’s performance over a longer period. This is because earnings are the lifeblood of any business, determining its ability and strength along with its growth prospects. Earnings-producing companies generally catch investors’ eye due to their solid financial position and growth potential, thereby leading to higher stock prices.
Thus, earnings-weighted ETFs have the potential to move higher relative to any other product in the earnings growth period. As a result, tilting toward this key metric is a sensible choice at present. For investors seeking to do this, there is a small lineup of U.S.-focused ETFs that accomplish this task.
Below, we have highlighted a few ETFs that could be great choices for investors seeking to make money, focusing on one of the most important aspects of stock investing.
WisdomTree U.S. LargeCap Index (EPS - Free Report)
WisdomTree U.S. LargeCap Index provides exposure to earnings-generating companies within the large-cap segment of the broad U.S. stock market by tracking the WisdomTree U.S. LargeCap Index. Holding 501 stocks in its basket, the fund is well spread out across each component, with each having less than 6% share. Additionally, WisdomTree U.S. LargeCap Index has exposure to a number of sectors, with information technology, financials, communication services and healthcare taking double-digit exposure each.
The ETF has amassed $949.7 million in its asset base and charges 8 bps in annual fees. Volume is light, trading around 42,000 shares a day. EPS has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 Must-Have ETFs for the Second Half).
WisdomTree U.S. MidCap Fund (EZM - Free Report)
WisdomTree U.S. MidCap Fund tracks the WisdomTree U.S. MidCap Index, providing exposure to 544 earnings-generating mid-cap companies. The fund is widely spread out across each component as each holds less than 1% of assets. It also has diverse exposure across various sectors like financials, industrials and consumer discretionary, which receive double-digit allocation each.
WisdomTree U.S. MidCap Fund charges 38 bps in fees per year while trading in an average daily volume of nearly 24,000 shares. It has $756.2 million in AUM and a Zacks ETF Rank #3 with a Medium risk outlook.
WisdomTree U.S. SmallCap Fund (EES - Free Report)
WisdomTree U.S. SmallCap Fund targets earnings-generating small-cap companies by tracking the WisdomTree U.S. SmallCap Index. Holding 894 stocks in its basket, it provides a nice balance across various securities as each firm holds less than 1% share in the basket. From a sector look, financials takes the largest share at 26.3% of assets while consumer discretionary, industrials, and information technology round off the next spots with double-digit exposure each (read: Here's Why You Should Bet on Beaten-Down Small-Cap ETFs).
WisdomTree U.S. SmallCap Fund has amassed $580.2 million in its asset base and sees a moderate volume of around 29,000 shares per day. It charges 38 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.