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DowDuPont's Solid Q1 Results Push Material ETFs Higher
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DowDuPont Inc. reported strong first-quarter results with both earnings and revenue beat. Higher prices and strong demand for packaging, paint and other materials more than offset the weak agriculture business.
Earnings per share came in at $1.12, easily surpassing the Zacks Consensus Estimate of $1.08 and improving 7% from the year-ago earnings. Revenues rose 5% year over year to $21.5 billion and edged past the estimated $21.32 billion (read: Earnings-Weighted ETFs to Tap 7-Year Growth).
The U.S. chemicals producer realized more than $300 million in annual cost synergy during the quarter. It is on track to deliver 75% run-rate against its $3.3 billion cost synergy commitment by the end of the third quarter of 2018. It expects second-quarter net sales to increase more than 10% year over year.
DowDuPont has been in the process of splitting itself into three independent companies — Materials Science, Agriculture and Specialty Products. The Materials Science business will likely be spun off by the end of the first quarter of 2019, while Agriculture and Specialty Products will get their own identity by Jun 1, 2019.
Market Impact
Shares of DWDP initially climbed as much as 3.1% but erased all the gains to close the day. The stock has a Zacks Rank #3 (Hold) and a VGM Score of C. It belongs to a solid industry, which is placed at the top 4% in terms of ranking among more than 250 Zacks industries.
Given this, ETFs having a large allocation to this chemical giant will be in focus in the days ahead. Below, we have highlighted the fund in detail:
This ETF tracks the Dow Jones U.S. Basic Materials Index and holds 50 stocks in its basket. The fund has AUM of $632.1 million and charges 44 bps in fees and expenses. Volume is good as it exchanges around 164,000 shares a day. DowDuPont occupies the top position in the basket, making up for 22.4 of the portfolio. The product is heavily skewed toward the chemical segment with three-fourth of the portfolio, while industrial gases, steel, and metals & mining receive minor allocation each. It added 1% on the day and has a Zacks ETF Rank #3 with a High risk outlook (read: What Lies Ahead for Materials ETFs?).
The most-popular material ETF follows the Materials Select Sector Index. This fund manages about $4.8 billion in its asset base and trades in volumes as heavy as around 6.2 million shares. The ETF charges 13 bps in fees per year from investors. In total, the fund holds about 25 securities in its basket with DWDP taking the top spot, holding nearly 21.7%. In terms of industrial exposure, chemicals dominates the portfolio with 73.1% share while containers & packaging, and metals & mining round off the top three positions. XLB gained 0.5% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Edge MSCI Multifactor Materials ETF
This ETF follows the MSCI USA Materials Diversified Multiple-Factor Capped Index and targets companies with the potential to outperform the broad U.S. healthcare sector. Holding 23 stocks in its basket, DWDP is the top firm with 19.5% allocation. From an industrial look, chemicals accounts for 60.2% of assets while paper packaging, steel, industrial gases and many others also receive minor allocation. The product has accumulated $4.8 million in its asset base and trades in a paltry volume of 1,000 shares per day on average. It charges 35 bps in annual fees and was flat post DWDP results. The fund has a Zacks ETF Rank #3.
This fund provides exposure to 117 materials stocks with AUM of $272.6 million. This is done by tracking the MSCI USA IMI Materials Index. Here too, DWDP is the top firm with 16.7% allocation. Chemicals accounts for 66.9%, while metals & mining, and container & packaging round off the top three spots with a double-digit exposure each. The ETF has 0.08% in expense ratio while volume is good at 112,000 shares a day. It was up 0.2% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook (see: all the Materials ETFs here).
This fund has amassed about $2.6 billion in its asset base and offers exposure to 118 stocks by tracking the MSCI US Investable Market Materials 25/50 Index. The ETF has 0.10% in expense ratio while volume is moderate at 145,000 shares. Here too, DowDuPont is the top firm accounting for nearly 16.7% share. Chemicals makes up for nearly three-fifths of the portfolio, while container & packaging and steel offer a nice mix in the portfolio. The ETF has added 0.2% and a Zacks ETF Rank #3 with a Medium risk outlook.
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DowDuPont's Solid Q1 Results Push Material ETFs Higher
DowDuPont Inc. reported strong first-quarter results with both earnings and revenue beat. Higher prices and strong demand for packaging, paint and other materials more than offset the weak agriculture business.
Earnings per share came in at $1.12, easily surpassing the Zacks Consensus Estimate of $1.08 and improving 7% from the year-ago earnings. Revenues rose 5% year over year to $21.5 billion and edged past the estimated $21.32 billion (read: Earnings-Weighted ETFs to Tap 7-Year Growth).
The U.S. chemicals producer realized more than $300 million in annual cost synergy during the quarter. It is on track to deliver 75% run-rate against its $3.3 billion cost synergy commitment by the end of the third quarter of 2018. It expects second-quarter net sales to increase more than 10% year over year.
DowDuPont has been in the process of splitting itself into three independent companies — Materials Science, Agriculture and Specialty Products. The Materials Science business will likely be spun off by the end of the first quarter of 2019, while Agriculture and Specialty Products will get their own identity by Jun 1, 2019.
Market Impact
Shares of DWDP initially climbed as much as 3.1% but erased all the gains to close the day. The stock has a Zacks Rank #3 (Hold) and a VGM Score of C. It belongs to a solid industry, which is placed at the top 4% in terms of ranking among more than 250 Zacks industries.
Given this, ETFs having a large allocation to this chemical giant will be in focus in the days ahead. Below, we have highlighted the fund in detail:
iShares U.S. Basic Materials ETF (IYM - Free Report)
This ETF tracks the Dow Jones U.S. Basic Materials Index and holds 50 stocks in its basket. The fund has AUM of $632.1 million and charges 44 bps in fees and expenses. Volume is good as it exchanges around 164,000 shares a day. DowDuPont occupies the top position in the basket, making up for 22.4 of the portfolio. The product is heavily skewed toward the chemical segment with three-fourth of the portfolio, while industrial gases, steel, and metals & mining receive minor allocation each. It added 1% on the day and has a Zacks ETF Rank #3 with a High risk outlook (read: What Lies Ahead for Materials ETFs?).
Materials Select Sector SPDR (XLB - Free Report)
The most-popular material ETF follows the Materials Select Sector Index. This fund manages about $4.8 billion in its asset base and trades in volumes as heavy as around 6.2 million shares. The ETF charges 13 bps in fees per year from investors. In total, the fund holds about 25 securities in its basket with DWDP taking the top spot, holding nearly 21.7%. In terms of industrial exposure, chemicals dominates the portfolio with 73.1% share while containers & packaging, and metals & mining round off the top three positions. XLB gained 0.5% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Edge MSCI Multifactor Materials ETF
This ETF follows the MSCI USA Materials Diversified Multiple-Factor Capped Index and targets companies with the potential to outperform the broad U.S. healthcare sector. Holding 23 stocks in its basket, DWDP is the top firm with 19.5% allocation. From an industrial look, chemicals accounts for 60.2% of assets while paper packaging, steel, industrial gases and many others also receive minor allocation. The product has accumulated $4.8 million in its asset base and trades in a paltry volume of 1,000 shares per day on average. It charges 35 bps in annual fees and was flat post DWDP results. The fund has a Zacks ETF Rank #3.
Fidelity MSCI Materials Index ETF (FMAT - Free Report)
This fund provides exposure to 117 materials stocks with AUM of $272.6 million. This is done by tracking the MSCI USA IMI Materials Index. Here too, DWDP is the top firm with 16.7% allocation. Chemicals accounts for 66.9%, while metals & mining, and container & packaging round off the top three spots with a double-digit exposure each. The ETF has 0.08% in expense ratio while volume is good at 112,000 shares a day. It was up 0.2% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook (see: all the Materials ETFs here).
Vanguard Materials ETF (VAW - Free Report)
This fund has amassed about $2.6 billion in its asset base and offers exposure to 118 stocks by tracking the MSCI US Investable Market Materials 25/50 Index. The ETF has 0.10% in expense ratio while volume is moderate at 145,000 shares. Here too, DowDuPont is the top firm accounting for nearly 16.7% share. Chemicals makes up for nearly three-fifths of the portfolio, while container & packaging and steel offer a nice mix in the portfolio. The ETF has added 0.2% and a Zacks ETF Rank #3 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>