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The fourth-quarter (Q4) earnings reporting cycle is in full swing. Investors have now shifted their focus from Fed and put emphasis on earnings releases. Bottom line may be investors’ top focus amid an earnings season, but top line probably tells you more about the inherent strength of a company.
Why to Follow Revenue Growth This Reporting Cycle?
For Q4, total earnings are expected to decline 7.2% from the same period last year on 4% higher revenues as per the Earnings Trends issued on Jan 18, 2023. Earnings growth will likely trail revenue growth in the coming two quarters. For Q1 and Q2 of 2023, earnings growths are likely to be negative 4.2% and 3.8% over revenue growth of 2.8% and 0.3%, respectively (read: 5 ETFs to Bet on Favorite Sectors of Q4 Earnings).
For Q4, four out of the Zacks classified 16 sectors of the S&P 500 will likely witness a double-digit growth in revenues. Further, investors should note that sales are harder to be influenced in an income statement than earnings. A company can land up on decent earnings numbers by adopting cost-cutting or some other measures that do not speak for its core strength. But it is harder for a company to mold its revenue figure.
Below, we highlight five sectors and their related ETFs that could be used to book some profits on revenue growth potential.
The sector is expected to expand 13.6% in Q4 followed by 16.4% expansion in Q3. The University of Michigan consumer sentiment for the United States increased to 64.6 in January of 2023 from 59.7 in December, the highest since April and beating market forecasts of 60.5, preliminary estimates showed.
The sector is expected to record 9.9% revenue growth in Q4, following 4.2% expansion in the previous quarter. The ongoing Russia-Ukraine issues will continue to drive defense spending higher. Additionally, the aerospace and defense sector has shown its resiliency to the recent market volatility.
As the economic activities have been gaining steam, transportation sector has fallen into a sweet spot. The sector is expected to record 10.5% revenue growth in Q4, following 20.7% expansion in the previous quarter.
Energy – Energy Select Sector SPDR ETF (XLE - Free Report)
The sector is expected to witness revenue growth of 12.9% in Q4 revenues, after 51.6% growth in Q3. The energy sector has been benefiting from decent oil prices on tight supply conditions amid a rising interest rates environment.
The sector is expected to witness revenue growth of 20.4% in the ongoing reporting cycle, after 32.7% growth in Q3. Decent sales of Motor Vehicle & Parts and the price inflation of new cars have been palpable. Both factors indicate that the business conditions remained favorable for the auto industry.
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5 Sector ETFs to Play on Upbeat Q4 Revenue Growth
The fourth-quarter (Q4) earnings reporting cycle is in full swing. Investors have now shifted their focus from Fed and put emphasis on earnings releases. Bottom line may be investors’ top focus amid an earnings season, but top line probably tells you more about the inherent strength of a company.
Why to Follow Revenue Growth This Reporting Cycle?
For Q4, total earnings are expected to decline 7.2% from the same period last year on 4% higher revenues as per the Earnings Trends issued on Jan 18, 2023. Earnings growth will likely trail revenue growth in the coming two quarters. For Q1 and Q2 of 2023, earnings growths are likely to be negative 4.2% and 3.8% over revenue growth of 2.8% and 0.3%, respectively (read: 5 ETFs to Bet on Favorite Sectors of Q4 Earnings).
For Q4, four out of the Zacks classified 16 sectors of the S&P 500 will likely witness a double-digit growth in revenues. Further, investors should note that sales are harder to be influenced in an income statement than earnings. A company can land up on decent earnings numbers by adopting cost-cutting or some other measures that do not speak for its core strength. But it is harder for a company to mold its revenue figure.
Below, we highlight five sectors and their related ETFs that could be used to book some profits on revenue growth potential.
Consumer Discretionary – Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
The sector is expected to expand 13.6% in Q4 followed by 16.4% expansion in Q3. The University of Michigan consumer sentiment for the United States increased to 64.6 in January of 2023 from 59.7 in December, the highest since April and beating market forecasts of 60.5, preliminary estimates showed.
Aerospace – iShares U.S. Aerospace & Defense ETF (ITA - Free Report)
The sector is expected to record 9.9% revenue growth in Q4, following 4.2% expansion in the previous quarter. The ongoing Russia-Ukraine issues will continue to drive defense spending higher. Additionally, the aerospace and defense sector has shown its resiliency to the recent market volatility.
Transportation – SPDR S&P Transportation ETF (XTN - Free Report)
As the economic activities have been gaining steam, transportation sector has fallen into a sweet spot. The sector is expected to record 10.5% revenue growth in Q4, following 20.7% expansion in the previous quarter.
Energy – Energy Select Sector SPDR ETF (XLE - Free Report)
The sector is expected to witness revenue growth of 12.9% in Q4 revenues, after 51.6% growth in Q3. The energy sector has been benefiting from decent oil prices on tight supply conditions amid a rising interest rates environment.
Autos – First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report)
The sector is expected to witness revenue growth of 20.4% in the ongoing reporting cycle, after 32.7% growth in Q3. Decent sales of Motor Vehicle & Parts and the price inflation of new cars have been palpable. Both factors indicate that the business conditions remained favorable for the auto industry.