Sector ETFs & Stocks To Bet On This Earnings Season

The Q2 earnings season will officially kick off next week with a few major banks set to report quarterly results. Like last quarter, the earnings picture looks bleak this time also thanks to a combination of tough comparisons, moderating economic growth and escalation in trade tariff.

S&P 500 earnings are expected to decline 2.9% from the same period last year despite 4.3% higher revenues while net margins are likely to witness a 90-basis-point compression. Earnings growth is expected to be negative for eight of the 16 Zacks sectors, with basic materials and conglomerates being the biggest drags.

Given the miserable picture, investors could place their bet on sectors that are expected to post positive earnings growth. Energy is expected to post strong earnings growth of 5.6%, followed by financials (3.2%), business services (2.9%), transportation (2.7%) and utilities (2.6%).

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. Each of 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.


Vanguard Energy ETF (VDE - Free Report): This fund manages about $3.4 billion in its asset base and provides exposure to a basket of 139 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees a good volume of about 295,000 shares and charges 10 bps in annual fees. VDE carries a Zacks ETF Rank #3 with a High risk outlook.

Enterprise Products Partners L.P. (EPD - Free Report): This is a leading integrated provider of processing and transportation services to producers of Natural Gas Liquids (NGLs) and consumers of NGL products. The stock has a Zacks Rank #2 and an Earnings ESP of +3.63%. The Zacks Consensus Estimate for the to-be-reported quarter has been revised upward by a couple of cents over the past 60 days and represents a modest 10.87% earnings growth. Additionally, the company has delivered positive earnings surprise of 17.03% over the past four quarters and is scheduled to report earnings on Aug 7.

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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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