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How Are Industrial ETFs Reacting to Mixed Q4 Earnings?

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The industrial sector is expected to remain strong as improving labor market conditions, growing consumer confidence, accelerated coronavirus vaccine rollout, gradual reopening of U.S. and global economies highlights brighter prospects, and the passage of the much-awaited $1.2-trillion infrastructure bill are pointing toward a faster recovering economy.

The strong jobs report for January is leading to solid optimism. The U.S. economy added 467,000 jobs in January 2022, surpassing market expectations of a rise of 150,000. The upside was largely driven by easing business restrictions amid the reopening of economies and accelerated coronavirus vaccine rollout. January figures stood out to be pleasantly surprising as the Omicron coronavirus variant weighed on the jobs market. The ADP report also showed that private companies cut 301,000 jobs.

Against this backdrop, we take a look at ETFs exposed to the sector and the impact of some big industrial earnings releases on them:

Industrial ETFs in Focus

In the current scenario, we believe it is prudent to discuss ETFs that have relatively high exposure to the industrial companies discussed below:

The Industrial Select Sector SPDR Fund (XLI - Free Report)

The Industrial Select Sector SPDR Fund seeks to provide investment results that, before expenses, match the performance of the Industrial Select Sector Index.

The Industrial Select Sector SPDR Fund comprises 72 holdings, with the below-mentioned companies taking about 16.3% of the fund. XLI has AUM of $16.92 billion and its expense ratio is 0.10%. The Industrial Select Sector SPDR Fund has lost about 2.5% since Jan 19 (as of Feb 10) (read: 4 Sector ETFs to Bet On in 2022).

Vanguard Industrials ETF (VIS - Free Report)                   

Vanguard Industrials ETF offers exposure to the industrial sector and follows the MSCI US Investable Market Industrials 25/50 Index.

Vanguard Industrials ETF holds about 353 securities in its basket, with the concerned companies having around 12.1% weight in the fund. VIS is down around 2.5% since Jan 19 (as of Feb 10). Vanguard Industrials ETF’s AUM is $4.67 billion and expense ratio is 0.10% (read: Will ETFs Suffer From Lower US Industrial Output in December?).

Fidelity MSCI Industrials Index ETF (FIDU - Free Report)

The Fidelity MSCI Industrials Index ETF seeks to provide investment returns that match, before fees and expenses, the performance of the MSCI USA IMI Industrials Index.

The Fidelity MSCI Industrials Index ETF has declined about 2.6% since Jan 19 (as of Feb 10). It comprises 366 holdings and puts about 12.7% weight in the companies discussed below. The Fidelity MSCI Industrials Index ETF’s AUM is $842.9 million and expense ratio, 0.08%.

iShares U.S. Industrials ETF (IYJ - Free Report)

The iShares U.S. Industrials ETF seeks to track the investment results of the Russell 1000 Industrials 40 Act 15/22.5 Daily Capped Index.

iShares U.S. Industrials ETF holds about 183 securities in its basket and puts about 9.1% weight in the companies in focus. The fund has lost almost 2.3% since Jan 19 (as of Feb 10). iShares U.S. Industrials ETF’s AUM is $1.52 billion and expense ratio is 0.41%.

Inside Q4 Earnings

On Jan 25, General Electric Company’s (GE - Free Report) fourth-quarter 2021 adjusted earnings were 82 cents per share, missing the Zacks Consensus Estimate of 83 cents. However, the bottom line compared favorably with the prior-year quarter’s earnings of 49 cents per share. Consolidated revenues totaled $20.30 billion, declining 3.5% year over year. Disappointing sales performance by the Healthcare, Power and Renewable Energy segments impacted revenues, partially offset by gains in Aviation. Also, the company’s top line missed the Zacks Consensus Estimate of $21.22 billion.

On Jan 25, 3M Company’s (MMM - Free Report) fourth-quarter 2021 earnings and sales outpaced the consensus estimate by 13.8% and 0.1%, respectively. The company’s adjusted earnings in the reported quarter were $2.31 per share. On a year-over-year basis, the bottom line declined 2.9%. In the reported quarter, 3M’s net sales totaled $8.61 billion, reflecting an increase of 0.3% from the year-ago quarter.

On Feb 3, Honeywell International Inc. (HON - Free Report) reported mixed results for fourth-quarter 2021, wherein earnings beat while revenues missed estimates. Adjusted earnings were $2.09 per share, beating the Zacks Consensus Estimate of $2.08 per share. Also, the bottom line rose 1% year over year. Revenues came in at $8.66 billion, lagging the consensus estimate of $8.74 billion. Notably, the top line decreased 3% year over year on a reported basis and 2% on an organic basis. Notably, the downside was largely due to supply-chain constraints and a decline in COVID-19 mask sales.

On Jan 20, Union Pacific Corporation’s (UNP - Free Report) fourth-quarter 2021 earnings of $2.66 per share beat the Zacks Consensus Estimate of $2.60. The bottom line rose 12.7% on a year-over-year basis. Operating revenues came in at $5.73 billion, which surpassed the Zacks Consensus Estimate of $5.55 billion. The figure rose 11.5% year over year, primarily due to an increase in freight revenues.

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