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5 ETFs to Bet on the Favorite Sectors of Q1 Earnings

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The first-quarter 2022 earnings season is set to kick off this week, with the banking sector slated to report numbers. Total S&P 500 earnings are expected to be up 3.2% from the same period last year on 10% higher revenues. This would follow the 32.5% rise in earnings in Q4 and 41.4% growth in Q3.

The earnings estimates have come down by 0.3% since the start of the period, with revisions to the energy and finance sectors moving in opposite directions to each other. Of the 16 Zacks sectors, 10 are expected to earn more than the year-ago quarter (read: S&P 500 ETFs to Buy on Bullish Analyst Ratings).

Transportation & aerospace will likely see huge earnings growth as both incurred losses in the year-ago quarter. The other eight sectors are expected to witness positive year-over-year earnings growth. Energy is expected to be the biggest contributor to S&P 500 earnings with 199.7% growth. This is likely to be followed by basic materials (44.2%) and construction (15.8%).

Given this, we have highlighted one ETF from the five sectors that could make great plays as the earnings season unfolds. These ETFs have a favorable Zacks ETF Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).


The aerospace and defense sector has shown immense strength in Q1, following Russia’s invasion of Ukraine. This is especially true as the attack on Ukraine has raised the prospect of higher military spending, thereby benefiting the stocks. As such, iShares U.S. Aerospace & Defense ETF (ITA - Free Report) seems a compelling choice.

iShares U.S. Aerospace & Defense ETF provides exposure to U.S. companies that manufacture commercial and military aircraft, and other defense equipment by tracking the Dow Jones U.S. Select Aerospace & Defense Index (read: Aerospace and Defense ETFs Rallying on Russia-Ukraine War).

iShares U.S. Aerospace & Defense ETF holds 35 stocks in its basket with AUM of $3.7 billion and an expense ratio of 0.42%. The product trades in an average daily volume of around 656,000 shares. iShares U.S. Aerospace & Defense ETF has a Zacks ETF Rank #3 with a Medium risk outlook.


The transport sector has rebounded strongly with more Americans getting vaccinated, business and economies being reopened, and consumer confidence growing. The sector is expected to post strong results on the back of these positives and iShares U.S. Transportation ETF (IYT - Free Report) seems a good pick.

iShares U.S. Transportation ETF offers exposure to U.S. airline, railroad, and trucking companies by tracking the S&P Transportation Select Industry FMC Capped Index. Holding 52 stocks in its basket, it charges 41 bps in annual fees and sees a solid trading volume of more than 231,000 shares a day. iShares U.S. Transportation ETF has $1.2 billion in AUM and a Zacks ETF Rank #2.


The energy sector has been benefiting from higher oil prices on supply disruptions and unprecedented demand. Vanguard Energy ETF (VDE - Free Report) offers broad exposure to the energy sector. It tracks the MSCI US Investable Market Energy 25/50 Index, holding 103 stocks in its basket. Integrated Oil & Gas dominates the portfolio with 40% share while oil & gas exploration & production, and oil & gas storage & transportation round off the next two with double-digit exposure each (read: 5 Sector ETFs to Tap for Q2).

Vanguard Energy ETF manages $8.2 billion in its asset base and sees a good volume of about 2 million shares. VDE charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook.


The materials sector, which tends to be the most sensitive to global economic growth expectations, has been performing well as prices of various materials have been on the rise. Additionally, a tight policy means solid economic growth, which in turn results in higher demand for materials. This has made the materials sector attractive and Materials Select Sector SPDR (XLB - Free Report) could be intriguing pick.  

Materials Select Sector SPDR is the most popular material ETF that follows the Materials Select Sector Index. It manages about $7.8 billion in its asset base and trades in volumes as heavy as around 9 million shares. Materials Select Sector SPDR holds about 28 securities in its basket and charges 10 bps in fees per year from its investors (read: 5 ETF Areas Shining Bright as US Economy Looks Strong).

In terms of industrial exposure, chemicals dominates the portfolio with 66.2% share, while metals & mining and containers & packaging round off the top three positions. The product has a Zacks ETF Rank #1 with a Medium risk outlook.


The construction sector is witnessing some slowdown this year as the cost of raw material prices and construction has increased in tandem with the rise in commodity prices. Additionally, mortgage rates spiked to 5% for the first time in a decade that will likely slow down demand and temper home prices. Despite this, homebuilders are expected to report solid earnings.

iShares U.S. Home Construction ETF (ITB - Free Report) should emerge strongly when the companies come up with solid results. It provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $1.5 billion, iShares U.S. Home Construction ETF holds a basket of 47 stocks and charges 41 bps in annual fees.

iShares U.S. Home Construction ETF trades in a heavy volume of around 5 million shares a day on average and has a Zacks ETF Rank #2 with a High risk outlook.

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