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ETFs to Watch on Likely Q3 Earnings Surprise for Materials

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The materials sector, which tends to be the most sensitive to global economic growth expectations, has shown strength on the back of the Fed’s super-dovish view. The popular ETFs — Materials Select Sector SPDR (XLB - Free Report) , Vanguard Materials ETF (VAW - Free Report) , iShares U.S. Basic Materials ETF (IYM - Free Report) and Fidelity MSCI Materials Index ETF (FMAT - Free Report) — havegained 3.7%, 4.8%, 3.3% and 4.9%, respectively, over the past three months (read: Materials ETF Hits New 52-Week High).

The solid trend is likely to continue as Q3 unfolds. Some well-known players in the space like Dow Inc. (DOW - Free Report) , Linde plc (LIN - Free Report) , Air Products & Chemicals (APD - Free Report) , Newmont Corporation (NEM - Free Report) , Ecolab Inc. (ECL - Free Report) , and DuPont de Nemours Inc. (DD - Free Report) will report earnings in the coming days. Let’s delve into the earnings picture of these companies that would drive the performance of these funds as these dominate their portfolio. These stocks collectively account for 57.3% share in IYM, 46.7% in XLB, 40.4% in VAW and 40.2% in FMAT.

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Surprise Prediction of These Stocks

Dow is expected to release earnings on Oct 22 before the opening bell. It has a Zacks Rank #3 and an Earnings ESP of +11.81%. It has seen positive earnings estimate revision of 9 cents over the past month for the to-be-reported quarter and delivered positive earnings surprise of 11.71% in the last four quarters. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The stock has a solid VGM Score of B.

Linde has a Zacks Rank #2 and an Earnings ESP of +1.38%. It witnessed no earnings estimate revision over the past 30 days for the to-be-reported quarter. The stock’s earnings surprise track over the past four quarters is good with an average beat of 7.54%. The stock has a Momentum Score of B. The company will report earnings on Nov 5 before market open (read: Biden or Trump, These 4 ETF Zones Are Set to Gain).

Air Products & Chemicals has a Zacks Rank #3 and an Earnings ESP of -2.48%. It has seen positive earnings estimate revision of a couple of cents over the past month for the to-be-reported quarter but has delivered negative earnings surprise of 0.11% over the last four quarters. The stock has a Momentum Score of A. The company is schedule to report on Nov 5 before market open.

Newmont, which is expected to release earnings on Oct 29, has a Zacks Rank #1 and an Earnings ESP of +2.24%. It has seen positive earnings estimate revision of 9 cents over the past month for the to-be-reported quarter but delivered negative earnings surprise of 4.67% in the last four quarters. The stock has a VGM Score of F.

Ecolab is expected to release earnings on Oct 27 before the opening bell. It has a Zacks Rank #3 and an Earnings ESP of +8.40%. The stock has seen positive earnings estimate revision of a penny over the past month for the to-be-reported quarter but delivered negative earnings surprise of 4.46% in the last four quarters. The stock has a solid Growth Score of B.

DuPont has a Zacks Rank #3 and an Earnings ESP of +0.61%. The company saw positive earnings estimate revision of couple of cents over the past 30 days for the to-be-reported quarter and delivered earnings surprise of 4.96% on average over the last four quarters. Additionally, the stock has a solid VGM Score of B. The company is scheduled to report earnings on Oct 29 before the opening bell (see: all the Materials ETFs here).

Summing Up

With positive earnings estimate revision and earnings surprises in the cards, materials ETFs might continue to see smooth trading in the weeks ahead. Further, the above-mentioned ETFs have a Zacks ETF Rank #2 (Buy), suggesting their outperformance.

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