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Solid Small-Cap Earnings Put Spotlight on These Sector ETFs
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Small-cap stocks have been on a tear of late on a slew of tailwinds. A fast-growing U.S. economy (compared with several other developed countries), a stronger greenback, a hawkish Fed and geopolitical tensions are favoring domestically-focused pint-sized stocks.
The Russell 2000 has already hit an all-time high this month. The small-cap index S&P 600 gained 7.3% in the past three months (as of May 17, 2018) versus 0.1% of the S&P 500. Against this backdrop, the question that arises is will the rally in small caps continue?
The Q1 earnings season is almost at its end with 88.5% of the S&P 600 index having reported so far. Earnings are up 21.4% year over year on 9.7% revenue growth, with 60.5% beating EPS estimates and 72.2% surpassing top-line expectations, per the Earnings Trends issued on May 17. Plus, revenue surprises are especially tracking above historical periods. For Q2, total S&P 600 earnings are expected to rise 18.2% on 9.8% higher revenues.
As many as 87.5% companies of the S&P 500 index have released numbers so far. Total earnings for the transportation sector are up 42.4% on 15% higher revenues with a blended beat of 85.7%.
The fund has about 61% focus on smaller cap transportation stocks followed by 35% mid caps and 22% large cap.
Construction – PowerShares Dynamic Building & Const ETF (PKB - Free Report)
Around 90.5% of the companies have reported earrings as of now. Earnings and revenues for the construction sector are up 56.3% and 17.3%, respectively, while the beat ratio is 52.6%.
The fund has about 48% exposure to small-cap construction stocks, followed by 37% mid caps and 15% large caps.
About 81.8%% of the companies have reported results, recording Q1 earnings growth of 54.9% and revenue expansion of 10%. The blended beat ratio is 44.4%.
This underlying index of the fund, which is a subset of the S&P SmallCap 600 Index, gives exposure to common stocks of U.S. consumer staples companies that are principally engaged in businesses providing consumer goods & services that have non-cyclical characteristics, including tobacco, textiles, food and beverage & non-discretionary retail.
A solid 95.5% of the companies posted earrings. Earnings and revenues for the construction sector are up 22.8% and 13.9%, respectively, while the beat ratio is 50% (read: Why These Sector ETFs Are Winning Picks Now).
The underlying index looks to track small-cap stocks from businesses providing industrial products and services, including engineering, heavy machinery, construction, electrical equipment, aerospace and defense and general manufacturing.
Almost 96.6% of the companies have released Q1 figures so far. Earnings growth has been recorded at 29%, while revenue growth is 12.8%. The blended beat ratio is 39.3%.
The underlying index of the fund is designed to measure the overall performance of small-cap U.S. stocks engaged in businesses of producing raw materials, including paper or wood products, chemicals, construction materials, and mining and metals.
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Solid Small-Cap Earnings Put Spotlight on These Sector ETFs
Small-cap stocks have been on a tear of late on a slew of tailwinds. A fast-growing U.S. economy (compared with several other developed countries), a stronger greenback, a hawkish Fed and geopolitical tensions are favoring domestically-focused pint-sized stocks.
The Russell 2000 has already hit an all-time high this month. The small-cap index S&P 600 gained 7.3% in the past three months (as of May 17, 2018) versus 0.1% of the S&P 500. Against this backdrop, the question that arises is will the rally in small caps continue?
For that we need to dig deeper into the earnings scorecard of the S&P 600 and understand the inherent strength of this capitalization (read: Best Small-Cap ETFs of 2017 with Huge Upside in 2018).
Inside Q1 Earnings Outperformance
The Q1 earnings season is almost at its end with 88.5% of the S&P 600 index having reported so far. Earnings are up 21.4% year over year on 9.7% revenue growth, with 60.5% beating EPS estimates and 72.2% surpassing top-line expectations, per the Earnings Trends issued on May 17. Plus, revenue surprises are especially tracking above historical periods. For Q2, total S&P 600 earnings are expected to rise 18.2% on 9.8% higher revenues.
Transportation – SPDR S&P Transportation ETF (XTN - Free Report)
As many as 87.5% companies of the S&P 500 index have released numbers so far. Total earnings for the transportation sector are up 42.4% on 15% higher revenues with a blended beat of 85.7%.
The fund has about 61% focus on smaller cap transportation stocks followed by 35% mid caps and 22% large cap.
Construction – PowerShares Dynamic Building & Const ETF (PKB - Free Report)
Around 90.5% of the companies have reported earrings as of now. Earnings and revenues for the construction sector are up 56.3% and 17.3%, respectively, while the beat ratio is 52.6%.
The fund has about 48% exposure to small-cap construction stocks, followed by 37% mid caps and 15% large caps.
Consumer Staples – PowerShares S&P SmallCap Consumer Staples ETF (PSCC - Free Report)
About 81.8%% of the companies have reported results, recording Q1 earnings growth of 54.9% and revenue expansion of 10%. The blended beat ratio is 44.4%.
This underlying index of the fund, which is a subset of the S&P SmallCap 600 Index, gives exposure to common stocks of U.S. consumer staples companies that are principally engaged in businesses providing consumer goods & services that have non-cyclical characteristics, including tobacco, textiles, food and beverage & non-discretionary retail.
Industrial Production – PowerShares S&P SmallCap Industrials ETF (PSCI - Free Report)
A solid 95.5% of the companies posted earrings. Earnings and revenues for the construction sector are up 22.8% and 13.9%, respectively, while the beat ratio is 50% (read: Why These Sector ETFs Are Winning Picks Now).
The underlying index looks to track small-cap stocks from businesses providing industrial products and services, including engineering, heavy machinery, construction, electrical equipment, aerospace and defense and general manufacturing.
Basic Materials – PowerShares S&P SmallCap Materials ETF (PSCM - Free Report)
Almost 96.6% of the companies have released Q1 figures so far. Earnings growth has been recorded at 29%, while revenue growth is 12.8%. The blended beat ratio is 39.3%.
The underlying index of the fund is designed to measure the overall performance of small-cap U.S. stocks engaged in businesses of producing raw materials, including paper or wood products, chemicals, construction materials, and mining and metals.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>