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Second-quarter 2022 earnings are set to kick off next week, with the banking sector slated to report numbers. Total S&P 500 earnings are expected to be up 1.8% from the same period last year on 9.7% higher revenues.
In addition to inflation, logistical challenges and macroeconomic uncertainty that have been recurring themes in the last couple of quarterly reporting cycles, the companies are expected to cite the strong U.S. dollar as another headwind this earnings season (read: Tap Dollar Strength With These ETFs).
Of the 16 Zacks sectors, 10 are expected to record positive earnings growth in the second quarter, with the strongest gains in energy (up 191.3%). This will be followed by transportation (132.5%), autos (22.1%), construction (20.7%), basic materials (18.4%) and business services (8.2%) sectors.
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).
Energy
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 113 stocks in its basket. Integrated Oil & Gas dominates the portfolio with a 40.3% share while oil & gas exploration & production, oil & gas refining and marketing and oil & gas storage & transportation round off the next three spots (read: Should You Buy the Dip in Energy Stocks & ETFs?).
Vanguard Energy ETF manages $7.2 billion in its asset base and sees a good volume of about 1 million shares. VDE charges 10 basis points (bps) in annual fees and has a Zacks ETF Rank #1 with a High risk outlook.
Transportation
The transport sector has bounced back strongly, with more Americans returning to traveling. As such, the sector is expected to post strong results, 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 49 stocks in its basket, it charges 41 bps in annual fees and sees a solid trading volume of around 274,000 shares a day. iShares U.S. Transportation ETF has $808 million in AUM and a Zacks ETF Rank #2.
Autos
First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) offers pure-play global exposure to 101 auto stocks by tracking the S-Network Electric & Future Vehicle Ecosystem Index. It has a moderate concentration across components as each of these makes up for no more than 5% share (read: ETFs to Win as Inflation Jumps to New 40-Year High).
First Trust S-Network Future Vehicles & Technology ETF has $51.2 million in AUM and trades in a small average daily trading volume of about 6,000 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank #3 with a High risk outlook.
Construction
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, the increase in rates has made home ownership more expensive for first-time buyers, discouraging people from buying homes. 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 $1.3 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 #3 with a High risk outlook.
Materials
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) could be an intriguing pick (read: 5 ETFs Outperforming as Commodity Gauge Hits New High).
Materials Select Sector SPDR is the most popular material ETF that follows the Materials Select Sector Index. It manages about $6.2 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.
In terms of industrial exposure, chemicals dominates the portfolio with a 68.9% share, while metals & mining and containers & packaging round off the top three positions. The product has a Zacks ETF Rank #2 with a Medium risk outlook.
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Tap Q2 Earnings Growth With Sector ETFs
Second-quarter 2022 earnings are set to kick off next week, with the banking sector slated to report numbers. Total S&P 500 earnings are expected to be up 1.8% from the same period last year on 9.7% higher revenues.
In addition to inflation, logistical challenges and macroeconomic uncertainty that have been recurring themes in the last couple of quarterly reporting cycles, the companies are expected to cite the strong U.S. dollar as another headwind this earnings season (read: Tap Dollar Strength With These ETFs).
Of the 16 Zacks sectors, 10 are expected to record positive earnings growth in the second quarter, with the strongest gains in energy (up 191.3%). This will be followed by transportation (132.5%), autos (22.1%), construction (20.7%), basic materials (18.4%) and business services (8.2%) sectors.
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).
Energy
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 113 stocks in its basket. Integrated Oil & Gas dominates the portfolio with a 40.3% share while oil & gas exploration & production, oil & gas refining and marketing and oil & gas storage & transportation round off the next three spots (read: Should You Buy the Dip in Energy Stocks & ETFs?).
Vanguard Energy ETF manages $7.2 billion in its asset base and sees a good volume of about 1 million shares. VDE charges 10 basis points (bps) in annual fees and has a Zacks ETF Rank #1 with a High risk outlook.
Transportation
The transport sector has bounced back strongly, with more Americans returning to traveling. As such, the sector is expected to post strong results, 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 49 stocks in its basket, it charges 41 bps in annual fees and sees a solid trading volume of around 274,000 shares a day. iShares U.S. Transportation ETF has $808 million in AUM and a Zacks ETF Rank #2.
Autos
First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) offers pure-play global exposure to 101 auto stocks by tracking the S-Network Electric & Future Vehicle Ecosystem Index. It has a moderate concentration across components as each of these makes up for no more than 5% share (read: ETFs to Win as Inflation Jumps to New 40-Year High).
First Trust S-Network Future Vehicles & Technology ETF has $51.2 million in AUM and trades in a small average daily trading volume of about 6,000 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank #3 with a High risk outlook.
Construction
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, the increase in rates has made home ownership more expensive for first-time buyers, discouraging people from buying homes. 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 $1.3 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 #3 with a High risk outlook.
Materials
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) could be an intriguing pick (read: 5 ETFs Outperforming as Commodity Gauge Hits New High).
Materials Select Sector SPDR is the most popular material ETF that follows the Materials Select Sector Index. It manages about $6.2 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.
In terms of industrial exposure, chemicals dominates the portfolio with a 68.9% share, while metals & mining and containers & packaging round off the top three positions. The product has a Zacks ETF Rank #2 with a Medium risk outlook.