4 Sector ETFs & Stocks To Bet On Q4 Earnings

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The Q4 earnings picture has been improving since the start of the quarter given the rollout of COVID-19 vaccines and optimism that the economy is coming out of the pandemic-led slump. This is especially true as S&P 500 earnings are expected to decline 10.4% despite 0.3% higher revenues. The earnings projection reflects an improvement from the 13.4% earnings decline expected at the end of the third quarter and follows the 7% earnings drop in Q3.

Earnings growth is expected to be negative for 11 of the 16 Zacks sectors. Transportation and energy are expected to be the biggest drags with expected earnings decline of 99.8% and 91.6%, respectively. Sectors with positive earnings growth in Q4 include autos (86.3% earnings growth), construction (27.2%), basic materials (7.6%), medical (6.3%), and aerospace (4.4%).

Given this, we have highlighted one ETF and one stock from the four sectors that could make great plays as the earnings season unfolds. These ETFs and stocks have a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

For stocks, we have added the extra criteria of a positive Earnings ESP. The combination of a Zacks Rank #3 or better and a positive ESP increases the odds of an earnings beat by 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.


The auto industry is benefiting from vaccine optimism, which will spur economic growth and lead to higher demand for vehicles. Persistent lower interest rates are also encouraging new-car buying, pushing more consumers to avail loans.

First Trust NASDAQ Global Auto ETF (CARZ - Free Report): This fund offers a pure-play global exposure to 34 auto stocks by tracking the NASDAQ OMX Global Auto Index. It has a moderate concentration across components as each of these make up for less than 8.2% share. CARZ has a lower level of $51.3 million in AUM and trades in a small average daily trading volume of about 23,000 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank #3 with High risk outlook.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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