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Q1 Earnings Effect: 5 Must-Watch ETF Charts

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The overall Q1 earnings picture is very strong, with broad-based growth momentum across all major sectors and the overall earnings tally reaching a new all-time quarterly record in Q1. Total Q1 earnings from 477 S&P 500 members or 95.4% of the index’s total membership are up 48.4% from the same period last year on 10.1% higher revenues, with 86% beating EPS and 77.4% beating revenue estimates.

Earnings and revenue growth are tracking above this group’s recent trend, including the pre-pandemic period. The outsized earnings growth is largely due to very strong numbers from the Finance sector. Additionally, earnings and revenue surprises are also tracking above historical levels. Further, the pace and magnitude of positive revisions has only accelerated, a trend that should pace up in the second half of the year.

Given this, several equity ETFs have impressed with their performances and generated handsome returns over the trailing one-month period though inflation fears and the resultant market sell-off have suppressed the returns. Below are five ETFs that have buoyed up on strong earnings results. In addition, we have given a chart for their one-month performance and compared them with the broad market fund (SPY - Free Report) and the broad sector.

Invesco KBW Bank ETF (KBWB - Free Report)

This fund provides exposure to companies primarily engaged in U.S. banking activities and has gained 8.1% in a month. The robust performance was driven by strong Q1 earnings growth of 98.3% and a beat ratio of 92.4%. Revenue growth and beat ratio are also impressive at 7.2% and 73.9%, respectively. KBWB has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 5 Banking ETFs That Have Gained More Than 30% YTD).

iShares Evolved U.S. Technology ETF (IETC - Free Report)

This ETF employs data science techniques to provide exposure to technology stocks. The tech sector Q1 earnings have been solid with big five tech titans reporting blockbuster results. The five ‘Big Tech’ players as a whole earned $74 billion in earnings in the March quarter on $311.6 billion in revenues. This group’s Q1 earnings and revenues are up 104% and 29% from the year-earlier period, respectively. This suggests that the best growth days of the sector may be behind it.

Beyond the big five players, total Q1 earnings for the 86.9% of the technology sector are up 56% from the same period last year on 24.8% higher revenues, with 93.4% of the companies beating EPS estimates and 95.1% beating revenue estimates. Both earnings and revenue growth expectations are tracking much above the past four quarters and the coming four quarters. Though earnings had powered IETC, the recent broad sector sell-off led to a decline of 2.1% in a month (read: 7 Tech ETFs That Survived the Recent Turmoil).

First Trust Materials AlphaDEX Fund (FXZ - Free Report)

This product targets the broad materials sector and employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index. Total earnings for the basic materials sector are up 80.4% on 12.2% higher revenues. Earnings growth represents the third-highest Q1 earnings and revenues take the fourth-largest spot. Given this, FXZ has gained 8% in the past month and boasts a Zacks ETF Rank #2 with a Medium risk outlook.

First Trust Nasdaq Retail ETF

The fund offers exposure to U.S. companies within the retail industry. Earnings for the 64.7% of the retail sector that have reported Q1 results are up 61.2% on revenue growth of 12.7%, with 90.9% beating EPS estimates and 81.8% beating top-line estimates. This is a notably better performance than the other recent quarters seen from the group. As a result, FTXD was up 1.7% over the past month and carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.

WisdomTree SmallCap Earnings ETF (EES - Free Report)

This fund offers exposure to the profitable companies in the broad U.S. small-cap equity index and has gained 2.1% in a month. The robust performance was driven by incredible Q1 earnings of the small-cap S&P 600 Index. About 90.7% of the index members have reported so far and total earnings are up 284.4% on 9.1% higher revenues with 72.5% beating EPS estimates and 75.2% beating revenue estimates. The ETF has a Zacks ETF Rank #3 with a High risk outlook (read: ETFs to Play the Strong Q1 Earnings Trend).

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