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Per the Earnings Trends issued Aug. 29, earnings estimates for full-year 2024 have been coming down lately, with estimates for 12 of the 16 Zacks sectors falling since late June.
Sectors that suffered the major declines include Business Services, Consumer Discretionary, Energy, Transportation, Autos, and others. In contrast, estimates for the Tech, Finance, Retail, and Utilities sectors have increased in that period.
Against this backdrop, below we highlight the four sectors that have seen a rise in analysts’ estimates. These sectors’ related exchange-traded funds (ETF) should gain in the coming days.
U.S. technology stocks were under significant pressure in early August. However, the tech space showed signs of improvement from mid-August as investor positioning remained heavily weighted toward bullish sentiment despite early-August selloffs.
The AI rally is still hot. In a 2024 McKinsey survey, 39% of respondents saw lower costs resulting from AI adoption in their organization, according to Forbes. The technology sector is expected to record 17.8% earnings growth in 2024 on 6.9% revenue growth (read: Cybersecurity ETFs Won in August Despite Tech Volatility).
Financial ETFs have rebounded this year after a prolonged period of volatility. A flattening yield curve was a major concern over the past few years. However, decent global growth, cooling U.S. inflation and hopes of a Fed rate cut have now made the space a winner.
Since banks borrow money at short-term rates and lend capital at long-term rates, the steepening of the yield curve is always a plus for bank ETFs. The financial sector is expected to record 10.1% earnings growth in 2024 on a 12.5% revenue decline (read: Time to Buy Financial & Bank ETFs?).
Several factors are favoring this sector. A decent consumer sentiment level, strong labor market and last-minute back-to-school/college shopping should give the space a boost. Plus, the sector should perform well in a low-rate environment, which we expect to see in the medium term. Retail sales momentum, too, has been decent. The retail sector is expected to record 12.5% earnings growth in 2024 on 4.5% revenue growth (read: Forget September Stock Slump: Buy These 5 ETFs Instead).
The utilities sector tends to be stable and provides consistent dividends. Utilities Select Sector SPDR ETF (XLU - Free Report) charges 9 bps in fees and yields 2.88% annually. The sector is expected to record 7.6% earnings growth on 1.4% revenue growth (read: Defensive ETFs Shine Amid a Rough Start to September).
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4 Sector ETFs Set to Gain From Rising Estimates
Per the Earnings Trends issued Aug. 29, earnings estimates for full-year 2024 have been coming down lately, with estimates for 12 of the 16 Zacks sectors falling since late June.
Sectors that suffered the major declines include Business Services, Consumer Discretionary, Energy, Transportation, Autos, and others. In contrast, estimates for the Tech, Finance, Retail, and Utilities sectors have increased in that period.
Against this backdrop, below we highlight the four sectors that have seen a rise in analysts’ estimates. These sectors’ related exchange-traded funds (ETF) should gain in the coming days.
Sector ETFs in Focus
Technology ETF
Technology Select Sector SPDR ETF (XLK - Free Report)
U.S. technology stocks were under significant pressure in early August. However, the tech space showed signs of improvement from mid-August as investor positioning remained heavily weighted toward bullish sentiment despite early-August selloffs.
The AI rally is still hot. In a 2024 McKinsey survey, 39% of respondents saw lower costs resulting from AI adoption in their organization, according to Forbes. The technology sector is expected to record 17.8% earnings growth in 2024 on 6.9% revenue growth (read: Cybersecurity ETFs Won in August Despite Tech Volatility).
Finance ETF
Financial Select Sector SPDR ETF (XLF - Free Report)
Financial ETFs have rebounded this year after a prolonged period of volatility. A flattening yield curve was a major concern over the past few years. However, decent global growth, cooling U.S. inflation and hopes of a Fed rate cut have now made the space a winner.
Since banks borrow money at short-term rates and lend capital at long-term rates, the steepening of the yield curve is always a plus for bank ETFs. The financial sector is expected to record 10.1% earnings growth in 2024 on a 12.5% revenue decline (read: Time to Buy Financial & Bank ETFs?).
Retail ETF
SPDR S&P Retail ETF (XRT - Free Report)
Several factors are favoring this sector. A decent consumer sentiment level, strong labor market and last-minute back-to-school/college shopping should give the space a boost. Plus, the sector should perform well in a low-rate environment, which we expect to see in the medium term. Retail sales momentum, too, has been decent. The retail sector is expected to record 12.5% earnings growth in 2024 on 4.5% revenue growth (read: Forget September Stock Slump: Buy These 5 ETFs Instead).
Utility ETF
Utilities Select Sector SPDR ETF (XLU - Free Report)
The utilities sector tends to be stable and provides consistent dividends. Utilities Select Sector SPDR ETF (XLU - Free Report) charges 9 bps in fees and yields 2.88% annually. The sector is expected to record 7.6% earnings growth on 1.4% revenue growth (read: Defensive ETFs Shine Amid a Rough Start to September).