Industrials ETFs In Focus On Q3 Earnings
The earnings season is off to a flying start with equity markets scaling record highs, owing to a slew of upbeat economic data, strong corporate performance and President Donald Trump's tax reform proposal. However, the performance has been a mixed bag for industrials companies, with some beating market expectations, while a few failed to do so (read: U.S. Fiscal Deficit at 3.5% of GDP: ETFs in Focus).
We will now discuss the performance of a few industrials giants such as General Electric (GE - Free Report) , 3M Company (MMM - Free Report) , Honeywell (HON - Free Report) , Caterpillar Inc (CAT - Free Report) and Union Pacific (UNP - Free Report) (read: 5 Biggest ETF Winners of Trump Trade Resurgence).
General Electric
Shares of General Electric Company declined more than 6.3% on Oct. 23, 2017, as it failed to beat the Zacks Consensus Estimate on earnings. Moreover, the market is bearish on the company as the outlook was revised down.
The company’s revenues of $33.472 billion increased 14.4% in third-quarter 2017 on a year-over–year basis. Moreover, revenues increased 13.2% on a sequential basis and came in above the Zacks Consensus Estimate of $31.921 billion.
General Electric reported non-GAAP earnings per share (EPS) of $0.29 for third-quarter 2017, decreasing 9.3% year over year but increasing 3.6% on a sequential basis. Also, it failed to beat the Zacks Consensus Estimate of $0.49. Moreover, GE lowered its full-year 2017 EPS guidance range to $1.05-$1.10 from $1.6-$1.7 previously.
The company reported earnings from continuing operations attributable to GE common shareowners of $1.9 billion, decreasing from $2.1 billion a year ago. Third-quarter 2017 orders increased 11% to $29.8 billion from $26.9 billion in the year-ago quarter. Moreover, GE’s backlog increased 3% to $328.0 billion from $319.2 billion in the year-ago quarter.
3M Company
Shares of 3M Company increased almost 5.7% at market close on Oct 24, 2017, after it beat the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues increased 16% in third-quarter 2017 on a year-over-year basis. Also, revenues increased 4.6% on a sequential basis. Moreover, revenues of $8.172 billion beat the consensus mark of $7.908 billion.
3M Company reported GAAP earnings per share (EPS) of $2.33 for third-quarter 2017, increasing 8.4% year over year but decreasing 9.7% on a sequential basis. Also, it beat the Zacks Consensus Estimate of $2.21. Moreover, 3M Company updated its full-year 2017 EPS guidance range to $9.00-$9.10 from the previous guided range of $8.80-$9.05. The company now expects organic local currency sales growth of 4-5%, up from 3-5% previously.
Honeywell
Shares of Honeywell increased almost 1.2% at market close on Oct 20, 2017, after it surpassed the Zacks Consensus Estimate on revenues. However, earnings came in line with the Zacks Consensus Estimate.
The company’s revenues increased 3.2% in third-quarter 2017 on a year-over-year basis. Also, revenues increased 0.4% on a sequential basis. Moreover, revenues of $10.121 billion beat the consensus mark of $9.965 billion.
Honeywell reported non-GAAP earnings per share (EPS) of $1.75 in third-quarter 2017, increasing 4.8% year over year but decreasing 2.8% on a sequential basis. It met the Zacks Consensus Estimate of $1.75. Moreover, 3M Company updated the full-year 2017 EPS guidance range to $7.05-$7.10 from the previous guided range of $7.00-$7.10.
Caterpillar Inc
Shares of Caterpillar increased 4.8% at market close on Oct 24, 2017, after it beat the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues increased 24.6% in third-quarter 2017 on a year-over-year basis. Moreover, revenues increased 0.7% on a sequential basis. Revenues of $11.413 billion beat the consensus mark of $10.609 billion.
Caterpillar reported non-GAAP earnings per share (EPS) of $1.95 for third -quarter 2017, increasing 130% year over year and 30.9% on a sequential basis. Also, it beat the Zacks Consensus Estimate of $1.22. Moreover, Caterpillar updated the full-year 2017 EPS guidance range to $6.25 from the previous guided range of $5.00. The company expects full-year 2017 sales to be around $44 billion from the range of $42-$44 billion guided previously, while it expects to incur $1.3 billion of restructuring costs.
Union Pacific
Shares of Union Pacific increased almost 4.3% at market close on Oct 26, 2017, after it beat the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues increased 4.5% in third-quarter 2017 on a year-over-year basis. Also, revenues increased 3% on a sequential basis. Revenues of $5.408 billion beat the consensus mark of $5.306 billion.
Union Pacific reported non-GAAP earnings per share (EPS) of $1.50 for third-quarter 2017, up 10.3% year over year and 3.4% on a sequential basis. It beat the Zacks Consensus Estimate of $1.49.
In the current scenario, we believe it is prudent to discuss the following ETFs that have a relatively high exposure to the industrial companies discussed (see all Industrial ETFs here).
Industrial Select Sector SPDR Fund (XLI - Free Report)
This fund focuses on providing exposure to the U.S. industrial sector. It has AUM of $13.1 billion and charges a fee of 14 basis points a year. It has a 5.8% allocation to General Electric, 6.0% to 3M, 5.0% to Honeywell, 3.7% to Caterpillar and 4.3% to Union Pacific (as of Oct 26, 2017). The fund has returned 26.9% in a year and 16.2% year to date (as of Oct 26, 2017). XLI has a Zacks ETF Rank of #2 (Buy) with a Medium risk outlook.
Vanguard Industrials ETF (VIS - Free Report)
This ETF is a pure play on the U.S. industrials sector. It has AUM of $3.4 billion and charges a fee of 10 basis points a year. It has a 7.3% allocation to General Electric, 4.4% to 3M, 3.6% to Honeywell, 2.6% to Caterpillar and 3.2% to Union Pacific (as of Sep 30, 2017). The fund has returned 26.2% in a year and 14.4% year to date (as of Oct 26, 2017). VIS has a Zacks ETF Rank of #2 with a Medium risk outlook.
iShares U.S. Industrials ETF (IYJ - Free Report)
This ETF is a relatively costly bet on the U.S. industrial sector. It has AUM of $1.2 billion and charges a fee of 44 basis points a year. It has a 5.7% allocation to General Electric, 4.3% to 3M, 3.4% to Honeywell, 2.5% to Caterpillar and 2.7% to Union Pacific (as of Oct 25, 2017). The fund has returned 27.7% in a year and 18.1% year to date (as of Oct 26, 2017). IYJ has a Zacks ETF Rank of #3 (Hold) with a Medium risk outlook.
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