Small capitalization, one of the most beaten-down zones in the coronavirus selloff, sprung back to life in April. iShares Russell 2000 ETF (IWM - Free Report) and SPDR S&P 600 Small Cap ETF are up 21.1% and 18.9%, respectively, in a month compared with the 15.3% gain in the S&P 500 Index (read: 5 Small-Cap ETFs Beating S&P 500 in April).
Extension of the paycheck protection program, some forgivable loans, a strong dollar and talks of reopening the economy and the relative previous underperformance to the large caps, supported the small-cap ETFs in April.
Coronavirus-led lockdowns and shutting down of businesses are causing a severe cash crunch among companies. Small caps with lesser financial support became more vulnerable to the virus-led fallout. Earnings underperformance has been prevalent for small-cap stocks for a long time.
This makes it important to have a look at the small-cap stocks’ earnings picture so that investors can spot the bright points.
Q1 Performance: S&P 600 Versus 500
First-quarter earnings for the S&P 500 are expected to be down 15.5% year over year on 1.5% higher revenues. This decline will follow a 0.4% uptick in Q4, 0.2% dip in Q3, 0.6% rise in Q2 and a 0.1% slip in Q1 of 2019.
Looking at Q1 as a whole for the small-cap index, total earnings are expected to be down 41.5% from the same period last year on 4% lower revenues. The decline in earnings will follow a 0.8% gain in Q4, a 14.5% slump in Q3, 12.1% decline in Q2 and 15.9% slide in Q1 of 2019, per the Earnings Trends issued on Apr 29, 2020.
Against this backdrop, below we highlight a few small-cap sector ETFs that are promising better earnings and revenue growth rate for the coronavirus-infected first quarter.
Construction — Invesco Dynamic Building & Construction ETF (PKB - Free Report)
The sector is likely to record 28.2% earnings growth in Q1 on 7.9% higher revenues. The fund has advanced 29.4% in the past month (as of May 5, 2020).
Utilities — Invesco S&P SmallCap Utilities & Communication Services ETF (PSCU - Free Report)
Earnings are likely to be 16.8% higher while revenues may see a 6.8% uptick. However, the fund PSCU has gained just 10% in the past month.
Finance — Invesco S&P SmallCap Financials ETF (PSCF - Free Report)
Earnings are likely to be up 1.4% year over year on 4.0% higher revenues. The fund has tacked on 15.8% gains in the past month.
Industrials — Invesco S&P SmallCap Industrials ETF (PSCI - Free Report)
The sector is likely to record a decline of 16.6% in earnings on 10.6% lower revenues. The aerospace segment is also likely to record a 12.4% decline in earnings on 4.6% lower revenues. The fund has gained 18.6% in the past month. However, the losses are pretty lower when compared with the other sectors.
Consumer Staples — Invesco S&P SmallCap Consumer Staples ETF (PSCC - Free Report)
The sector is likely to end the first quarter with a 28.7% decline in earnings and 1% revenue gains. The fund PSCC has gained only 11.6% in the past month.
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Small capitalization, one of the most beaten-down zones in the coronavirus selloff, sprung back to life in April. iShares Russell 2000 ETF (IWM - Free Report) and SPDR S&P 600 Small Cap ETF are up 21.1% and 18.9%, respectively, in a month compared with the 15.3% gain in the S&P 500 Index (read: 5 Small-Cap ETFs Beating S&P 500 in April).
Extension of the paycheck protection program, some forgivable loans, a strong dollar and talks of reopening the economy and the relative previous underperformance to the large caps, supported the small-cap ETFs in April.
Coronavirus-led lockdowns and shutting down of businesses are causing a severe cash crunch among companies. Small caps with lesser financial support became more vulnerable to the virus-led fallout. Earnings underperformance has been prevalent for small-cap stocks for a long time.
This makes it important to have a look at the small-cap stocks’ earnings picture so that investors can spot the bright points.
Q1 Performance: S&P 600 Versus 500
First-quarter earnings for the S&P 500 are expected to be down 15.5% year over year on 1.5% higher revenues. This decline will follow a 0.4% uptick in Q4, 0.2% dip in Q3, 0.6% rise in Q2 and a 0.1% slip in Q1 of 2019.
Looking at Q1 as a whole for the small-cap index, total earnings are expected to be down 41.5% from the same period last year on 4% lower revenues. The decline in earnings will follow a 0.8% gain in Q4, a 14.5% slump in Q3, 12.1% decline in Q2 and 15.9% slide in Q1 of 2019, per the Earnings Trends issued on Apr 29, 2020.
Against this backdrop, below we highlight a few small-cap sector ETFs that are promising better earnings and revenue growth rate for the coronavirus-infected first quarter.
Construction — Invesco Dynamic Building & Construction ETF (PKB - Free Report)
The sector is likely to record 28.2% earnings growth in Q1 on 7.9% higher revenues. The fund has advanced 29.4% in the past month (as of May 5, 2020).
Utilities — Invesco S&P SmallCap Utilities & Communication Services ETF (PSCU - Free Report)
Earnings are likely to be 16.8% higher while revenues may see a 6.8% uptick. However, the fund PSCU has gained just 10% in the past month.
Finance — Invesco S&P SmallCap Financials ETF (PSCF - Free Report)
Earnings are likely to be up 1.4% year over year on 4.0% higher revenues. The fund has tacked on 15.8% gains in the past month.
Industrials — Invesco S&P SmallCap Industrials ETF (PSCI - Free Report)
The sector is likely to record a decline of 16.6% in earnings on 10.6% lower revenues. The aerospace segment is also likely to record a 12.4% decline in earnings on 4.6% lower revenues. The fund has gained 18.6% in the past month. However, the losses are pretty lower when compared with the other sectors.
Consumer Staples — Invesco S&P SmallCap Consumer Staples ETF (PSCC - Free Report)
The sector is likely to end the first quarter with a 28.7% decline in earnings and 1% revenue gains. The fund PSCC has gained only 11.6% in the past month.
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 >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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