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Energy ETFs to Gain on Upbeat Exxon, Chevron Q2 Earnings

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The energy has been one of the top-performing sectors of this year driven by an improving demand outlook as the economy recovers. Better-than-expected earnings from the two big oil giants — Exxon Mobil (XOM - Free Report) and Chevron (CVX - Free Report) — are expected to continue fueling the strong trend.

Exxon Mobil posted its biggest quarterly profit in more than a year on rebounding demand for oil, gas and chemicals while Chevron logged profits for the second consecutive quarter on rising demand for petroleum products and an increase in oil prices (see: all the Energy ETFs here).

Earnings in Focus

The largest U.S. oil producer Exxon Mobil came up with earnings of $1.10 per share, beating the Zacks Consensus Estimate of $1.02. The company had incurred a loss of 26 cents in the year-ago quarter. Revenues more than doubled from the year-ago quarter to $67.74 billion and edged past the estimate of $63.73 billion.

Chevron reported earnings of $1.71 per share, outpacing the Zacks Consensus Estimate of $1.54. The company had incurred a loss of $1.59 per share in the year-ago period. Revenues jumped 179% year over year to $37.6 billion and edged past the consensus mark of $35.6 billion. With free cash flow reaching the highest in two years, the company plans to resume stock repurchases in the third quarter at an annual rate of $2 billion to $3 billion a year.

ETFs in Focus

Following the results, energy ETFs with the largest allocation to the energy behemoths are in focus. Below we highlight the most popular ones in details.

Energy Select Sector SPDR (XLE - Free Report)

This is the largest and the most-popular ETF in the energy space with AUM of $23 billion and an average daily volume of 27.5 million shares per day. Expense ratio is 0.12%. The fund follows the Energy Select Sector Index and holds 22 securities in its basket. Exxon Mobil and Chevron occupy the top two spots with 23.7% and 21.3% share, respectively. The product has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Play Revenue Growth With 5 ETFs As Earnings Hopes Too Upbeat).

iShares U.S. Energy ETF (IYE - Free Report)

This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 35 stocks in its basket with AUM of $2.2 billion and an average daily volume of about 2.3 million shares. The product charges 42 bps in fees per year from its investors. Exxon Mobil and Chevron occupy the top two positions in the basket, taking the bigger chunk of assets at 23.4% and 18.9%, respectively. The product has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Vanguard Energy ETF (VDE - Free Report)

This fund manages $5 billion in asset base and provides exposure to a basket of 94 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees a good volume of about 1 million shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the two leading firms with respectively 21.8% and 16.4% allocation. VDE has a Zacks ETF Rank #2 with a High risk outlook (read: Here's Why You Should Bet on Energy ETFs Now).

Fidelity MSCI Energy Index ETF (FENY - Free Report)

The fund follows the MSCI USA IMI Energy Index, holding 99 stocks in its basket. Of these, XOM and CVX take the top two spots at 21.9% and 16.5%, respectively. The product charges 8 bps in annual fees and trades in a good volume of around 931,000 shares. It has accumulated $901.5 million in its asset base and has a Zacks ETF Rank #3 with a High risk outlook.