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What Lies Ahead for DowDuPont ETFs in Q4 Earnings

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Chemical giant DowDuPont Inc. is set to release fourth-quarter 2017 results on Feb 1, before the opening bell. So, it is worth taking a look at the company’s fundamentals ahead of its results.

The stock has gained 4.9% over the past three months but lagged the industry’s average growth of 6.3%. The upside is expected to continue as DowDuPont is poised to beat the earnings estimate as per the Zacks methodology given the positive earnings revision trend, which is generally a precursor to an earnings beat (read: 4 ETFs Set to Surge in Q4 Earnings).



Inside Our Methodology

The stock saw earnings estimate revision of a penny over the past 30 days for the fourth quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good indicator of some favorable trends for DWDP in this report.

In fact, DowDuPont has a Zacks Rank #2 (Buy) and an Earnings ESP of +1.37%, indicating higher chances of beating estimates this quarter. Betting on stocks that have a combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) usually leads to profits in an investor’s portfolio. Our research shows that the chance of a positive earnings surprise is as high as 70% for the stocks with this combination. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Additionally, the earnings surprise history is strong with the company delivering a positive earnings surprise of 11.68% on average in the past four quarters. Though DWDP has an ugly Value and Growth Style Score of C and D, respectively, it belongs to the top-ranked Zacks industry (top 17%), suggesting smooth trading in the days ahead. As a result, an earnings beat could lead to a higher share price (read: ETFs to Buy as U.S. Manufacturing Hits 13-Year High).

According to the analysts compiled by Zacks, DowDuPont has an average target price of $78.72 with about 79% of the analysts having a Strong Buy or a Buy rating ahead of its earnings. This indicates a 3.7% upside to the current price of DWDP.

What to Watch?

Since the company is in the process of integrating its three divisions and their separation into three independent companies, some divestitures made to facilitate the process could hurt the top line.

ETFs in Focus

Given this, ETFs having the highest allocation to this chemical giant will be in focus going into its earnings announcement. We have highlighted five funds that have DowDuPont as the top firm in their holdings with a double-digit exposure. These could be potential movers if DWDP surprises the market (see: all the Materials ETFs here):

iShares U.S. Basic Materials ETF (IYM - Free Report) : The fund was up nearly 8% in the past three months and has a Zacks ETF Rank #2 (Buy) with a High risk outlook. DowDuPont makes up for 24.5% of the assets.

Materials Select Sector SPDR (XLB - Free Report) : The fund added 7.7% in the same time frame and has a Zacks ETF Rank #2 with a Medium risk outlook. DowDuPont accounts for 23.3% share (read: 3 Sector ETFs for 2018).

iShares Edge MSCI Multifactor Materials ETF : It gained 8.1% and carries a Zacks ETF Rank #3. Here, DWDP accounts for 20.9% of the assets.

Fidelity MSCI Materials Index ETF (FMAT - Free Report) : This ETF also has a Zacks ETF Rank #2 with a Medium risk outlook and gained 7.5%. DowDuPont has 17.9% allocation.

Vanguard Materials ETF (VAW - Free Report) : It surged about 7.7% and has a Zacks ETF Rank #2 with a Medium risk outlook. Here, DWDP takes 17.5% share.

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