Industrial ETFs Are Gaining Despite Mixed Q2 Earnings

The industrial sector has been delivering mixed results so far this reporting season. Of the 93.1% S&P industrial companies that have reported, 96.3% beat on the bottom line while 81.5% surpassed revenue estimates. For these companies, earnings declined 39.8% and revenues deteriorated 18.9% year over year, per the Earnings Trends report issued on Aug 12.

The coronavirus outbreak has caused an unprecedented collapse in economic activities as governments had to shut down commerce and implemented social-distancing measures in an effort to contain the spread of the virus. The pandemic is sparking fears of a global economic recession among investors as the outbreak is disrupting global supply chains owing to the shutdown of economic activities.

However, the improving manufacturing numbers have instilled optimism among investors. The U.S. ISM Manufacturing PMI came in at 54.2 for July 2020, up from 52.6 in the previous month and beat market expectations of 53.6. That is the highest reading since March 2019 as manufacturing activity is recovering after the pandemic-induced turbulence. A reading above 50 indicates expansion in manufacturing, which makes up about 11% of the U.S. economy, per a Reuters article. Also, the U.S. economy has started to reopen in phases and there is massive Fed and government stimulus to combat the crisis which can help the sector rebound.

Against this backdrop, we take a look at some big industrial earnings releases and see if these can leave an impact on ETFs exposed to the space.

Inside Q2 Earnings

On Jul 29, General Electric Company’s GE second-quarter 2020 adjusted loss was 15 cents per share wider than the Zacks Consensus Estimate of loss of 14 cents. Moreover, the bottom line compares unfavorably with the year-ago quarter’s earnings of 16 cents per share. Consolidated revenues totaled $17.75 billion, reflecting a year-over-year drop of 24.2%. Sluggish Industrial and GE Capital’s performance hurt the quarterly results. However, revenues beat the Zacks Consensus Estimate of $17.01 billion.

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