Back to top

Image: Bigstock

What's in Store for Material ETFs in Q4 Earnings?

Read MoreHide Full Article

The materials sector, which tends to be the most-sensitive to global economic growth expectations, has shown strength on optimism that COVID-19 vaccines will lead to faster-than-expected economic recovery.

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) — have gained 14.5%, 15.9%, 17.2% and 16.1%, respectively, over the past three months (read: 4 Sector ETFs & Stocks to Bet on Q4 Earnings).

The solid trend is likely to continue as Q4 unfolds. Some well-known players in the space like 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 49.1% share in IYM, 42.1% in XLB, 33.3% in VAW and 33.1% 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

Linde has a Zacks Rank #3 and an Earnings ESP of 0.00%. It witnessed no earnings estimate revision over the past 30 days for the to-be-reported quarter. The company is expected to post substantial earnings growth of 13.2% and its earnings surprise track over the past four quarters is good with an average beat of 7.57%. The company will report earnings on Feb 5 before market open.

Air Products & Chemicals has a Zacks Rank #3 and an Earnings ESP of 0.00%. It has seen no earnings estimate revision over the past month for the to-be-reported quarter but witnessed a negative earnings surprise of 0.34% over the last four quarters. The company is expected to report earnings growth of 2.3% for to-be-reported quarter and on Feb 4 before market open (read: 5 Best ETF Investing Ideas for 2021).

Newmont, which is expected to release earnings on Feb 18, has a Zacks Rank #4 and an Earnings ESP of -0.35%. It has seen negative earnings estimate revision of 7 cents over the past month for the to-be-reported quarter but is expected to deliver 92% earnings growth. The stock witnessed a negative earnings surprise of 0.04% in the last four quarters.

Ecolab is expected to release earnings on Feb 16 before the opening bell. It has a Zacks Rank #3 and an Earnings ESP of +0.08%. The stock saw no earnings estimate revision over the past month for the to-be-reported quarter and is expected to deliver earnings decline of 25.9%. It came up with a negative earnings surprise of 2.94% in the last four quarters.

DuPont has a Zacks Rank #3 and an Earnings ESP of +5.09%. The company saw positive earnings estimate revision of 6 cents over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 8.27% on average over the last four quarters. However, the stock has estimated earnings growth of 10.5%. The company is scheduled to report earnings on Feb 4 (see: all the Materials ETFs here).

Summing Up

Materials ETFs might continue to see smooth trading in the weeks ahead given that the overall sector is expected to post 12.8% earnings growth, per Earnings Trends. Further, the above-mentioned ETFs have a Zacks ETF Rank #2, suggesting their outperformance.

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 >>