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Small-Cap Sector ETFs to Tap In Light of Q2 Earnings
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Small-cap stocks have been staging a decent performance in recent times. SPDR S&P 600 Small Cap ETF has gained 6.1% past month (as of Jul 22, 2022) versus 5.4% gains in the S&P 500. But things are taking a turn for the better for the pint-sized stocks as these have less domestic exposure and outperforms in a rising greenback environment.
Now, it’s earnings time. Investors must be interested in knowing how the earnings picture is evolving for the small-cap segment. That would give investors a clear idea in assessing the future performance of an otherwise still-undervalued small-cap segment.
Projected Q2 Performance: S&P 600 Versus 500
Per Zacks Earnings Trends issued on Jul 20, 2022, the S&P 500 earnings are projected to grow 3.7% in Q2 on 9.6% higher revenues. This increment in earnings will follow a 9.8% increase in Q1. Revenue growth in Q1 was 13.8%.
Looking at Q2 as a whole for the small-cap index, total earnings are expected to be up 8.9% from the same period last year on 12.4% higher revenues. The growth in earnings will follow a 23.6% expansion in Q1. Revenue growth in Q1 was 21.2%.
Against this backdrop, below we highlight a few small-cap sector ETFs that are promising a better earnings and revenue growth rate in the ongoing reporting season.
Earnings are likely to be 40.2% higher while revenues may see a 33.8% uptick. The fund XTN has gained 5.8% in the past one month (as of Jul 22, 2022). Though not fully exposed to the small-cap stocks, the underlying S&P Transportation Select Industry Index of the fund XTN represents the transportation segment of the S&P Total Market Index.
Energy — Invesco S&P SmallCap Energy ETF (PSCE - Free Report)
The oil rally of this year is known to all. Restricted global supplies amid supply-chain issues and geopolitical concerns and higher demand made the space a winner. The space is expected to report revenue growth of 48.5%. The fund has lost 1.6% past month.
Upbeat activities in infrastructure and industrials sectors made demand for materials high. Orders of Chemical Products remained strong. Chemical Products remained strong. Earnings are likely to be up 77.7% year over year on 18.5% higher revenues. The fund has advanced 3.9% in the past three months. The fund has gained 3.6% past month.
Industrial activities have been robust in July. Employment in manufacturing (+29,000) was upbeat in June. Employment in manufacturing decreased by 29,000 from its level in February 2020.
This sector of the S&P 600 Index is likely to record 10.7% earnings growth in Q2 on 15.3% higher revenues. The fund has gained 8.1% past month.
Construction — Invesco Dynamic Building & Construction ETF (PKB - Free Report)
The sector is likely to close out the Q2 with a 2.1% increase in earnings and 7.1% revenue gains. The fund PKB, which has 50% exposure to small-cap equities and 40% focus on mid-cap stocks, has added 12.7% past month.
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Small-Cap Sector ETFs to Tap In Light of Q2 Earnings
Small-cap stocks have been staging a decent performance in recent times. SPDR S&P 600 Small Cap ETF has gained 6.1% past month (as of Jul 22, 2022) versus 5.4% gains in the S&P 500. But things are taking a turn for the better for the pint-sized stocks as these have less domestic exposure and outperforms in a rising greenback environment.
Now, it’s earnings time. Investors must be interested in knowing how the earnings picture is evolving for the small-cap segment. That would give investors a clear idea in assessing the future performance of an otherwise still-undervalued small-cap segment.
Projected Q2 Performance: S&P 600 Versus 500
Per Zacks Earnings Trends issued on Jul 20, 2022, the S&P 500 earnings are projected to grow 3.7% in Q2 on 9.6% higher revenues. This increment in earnings will follow a 9.8% increase in Q1. Revenue growth in Q1 was 13.8%.
Looking at Q2 as a whole for the small-cap index, total earnings are expected to be up 8.9% from the same period last year on 12.4% higher revenues. The growth in earnings will follow a 23.6% expansion in Q1. Revenue growth in Q1 was 21.2%.
Against this backdrop, below we highlight a few small-cap sector ETFs that are promising a better earnings and revenue growth rate in the ongoing reporting season.
Sector ETFs in Focus
Transportation — SPDR S&P Transportation ETF (XTN - Free Report)
Earnings are likely to be 40.2% higher while revenues may see a 33.8% uptick. The fund XTN has gained 5.8% in the past one month (as of Jul 22, 2022). Though not fully exposed to the small-cap stocks, the underlying S&P Transportation Select Industry Index of the fund XTN represents the transportation segment of the S&P Total Market Index.
Energy — Invesco S&P SmallCap Energy ETF (PSCE - Free Report)
The oil rally of this year is known to all. Restricted global supplies amid supply-chain issues and geopolitical concerns and higher demand made the space a winner. The space is expected to report revenue growth of 48.5%. The fund has lost 1.6% past month.
Basic Materials — Invesco S&P SmallCap Materials ETF (PSCM - Free Report)
Upbeat activities in infrastructure and industrials sectors made demand for materials high. Orders of Chemical Products remained strong. Chemical Products remained strong. Earnings are likely to be up 77.7% year over year on 18.5% higher revenues. The fund has advanced 3.9% in the past three months. The fund has gained 3.6% past month.
Industrial Products — Invesco S&P SmallCap Industrials ETF (PSCI - Free Report)
Industrial activities have been robust in July. Employment in manufacturing (+29,000) was upbeat in June. Employment in manufacturing decreased by 29,000 from its level in February 2020.
This sector of the S&P 600 Index is likely to record 10.7% earnings growth in Q2 on 15.3% higher revenues. The fund has gained 8.1% past month.
Construction — Invesco Dynamic Building & Construction ETF (PKB - Free Report)
The sector is likely to close out the Q2 with a 2.1% increase in earnings and 7.1% revenue gains. The fund PKB, which has 50% exposure to small-cap equities and 40% focus on mid-cap stocks, has added 12.7% past month.