Bet On Favorite Sector ETFs & Stocks This Earnings Season

Like the first three quarters of 2019, the earnings picture looks weak for Q4 thanks to tough comparisons and moderating economic growth.

The S&P 500’s earnings are expected to decline 3.7% year over year despite 3.4% higher revenues. This would follow 1.7% deceleration in the third quarter, 0.6% growth in the second quarter and a flat showing in the first quarter. Earnings growth is expected to be negative for 10 of the 16 Zacks sectors, autos and energy being the biggest drags with expected earnings decline of 56.5% and 42.1%, respectively.

Given this dismal picture, investors could place their bet on sectors that are expected to post earnings growth. Utilities is expected to record strong earnings growth of 17.9%, followed by business services (9.6%), finance (7.5%), construction (5.5%) and medical (3.5%).

Given this, we have highlighted one ETF and one stock from some of these 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 VGM Score of B or better and a positive Earnings ESP. Stocks with a Zacks Rank #3 or better and a positive ESP have 70% chance of beating estimates.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.


Utilities Select Sector SPDR (XLU - Free Report): With AUM of $10.7 billion, this fund provides exposure to a small basket of 28 securities by tracking the Utilities Select Sector Index. Electric utilities take the top spot in terms of sectors at 61.6%, closely followed by multi utilities (31.8%). The product charges 13 bps in annual fees and sees heavy volume of around 16.5 million shares on average. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Algonquin Power & Utilities Corp. (AQN - Free Report): This renewable energy and regulated utility company is engaged in the ownership of power generation facilities, and water and energy utilities primarily in North America. It has a Zacks Rank #3 and an Earnings ESP of +4.35%. The stock saw no earnings estimate revision for the to-be-reported quarter over the past three months and has an expected earnings growth of 21.4%. However, its trailing four-quarter negative earnings surprise is 3.41%, on average. The company is slated to release earnings results on Feb 27.

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Disclosure: 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 specific ...

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