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The materials sector, which tends to be the most sensitive to global economic growth expectations, has been performing well with economic recovery gathering pace. The popular ETFs — Materials Select Sector SPDR (XLB - Free Report), Vanguard Materials ETF (VAW - Free Report), iShares U.S. Basic Materials ETF (IYM - Free Report), and Fidelity MSCI Materials Index ETF (FMAT - Free Report) — have gained 3.4%, 3.9%, 1.9%, and 3.9%, respectively over the past three months.

Going into the Q2 earnings season, earnings releases from the sector giants will determine the movement of these funds. Some well-known players in the space like Linde plc (LIN - Free Report), Air Products & Chemicals (APD - Free Report), Dow Inc. (DOW - Free Report), Ecolab Inc. (ECL - Free Report), Nucor (NUE - Free Report) and DuPont de Nemours Inc. (DD - Free Report) will report earnings in the coming days. Let’s delve into the earnings picture of these companies as that would drive the performance of the funds dominated by them. These stocks collectively account for 44.2% in XLB, 42.6% share in IYM, 34.5% in VAW and 34.4% in FMAT.

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Surprise Prediction for These Stocks

Linde has an Earnings ESP of -1.85% and a Zacks Rank #3. The company witnessed negative earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter. The stock’s earnings surprise track over the past four quarters is good with an average beat of 6.92%. The stock has a Growth Score of B. The company will report earnings on Jul 27 before market open.

Air Products & Chemicals has an Earnings ESP of -0.60% and a Zacks Rank #3. It saw no earnings estimate revision over the past 30 days for the to-be-reported quarter and has delivered a positive earnings surprise of 1.30%, on average, for the last four quarters. The stock has a Value Score of B. The company is scheduled to report on Aug 3 before market open.

Dow is scheduled to release earnings on Jul 25 before the opening bell. It has an Earnings ESP of +0.66% and a Zacks Rank #5 (Strong Sell). Over the past 30 days, the consensus estimate has been revised downward by a penny for the to-be-reported quarter. The company delivered an earnings surprise of 13.29% in the last four quarters, on average. The stock has a solid VGM Score of B.

Ecolab is set to release earnings on Aug 1 before the opening bell. It has an Earnings ESP of +0.50% and a Zacks Rank #2. The stock has seen a positive earnings estimate revision of a penny over the past month for the to-be-reported quarter and delivered an earnings surprise of 0.88%, on average, in the last four quarters. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The stock has a solid Momentum Score of B.

Nucor, which is slated to release earnings on Jul 25 before the opening bell, has a Zacks Rank #2 and an Earnings ESP of +0.30%. It has seen a positive earnings estimate revision of 3 cents over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 10.78%, on average, in the last four quarters. The stock has a VGM Score of A.

DuPont has an Earnings ESP of +0.43% and a Zacks Rank #4 (Sell). The company saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. It delivered an earnings surprise of 9.13%, on average, over the last four quarters. The company is scheduled to report earnings on Aug 2 before the opening bell.

Summing Up

While some of the major players seem to have less chances of beating earnings estimates, the sector is expected to post a double-digit earnings decline of 40.3%, per the latest Earnings Trends report. Additionally, the sector has an unfavorable Zacks Rank in the bottom 13%, suggesting that material ETFs might see some trouble in the weeks ahead. However, the abovementioned ETFs have a favorable Zacks ETF Rank #3.

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