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5 Sector ETF Winners Amid Q2 Earnings Season

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It has been almost a month since the second-quarter earnings season kicked off. The emerging picture shows resilience, with an above-average proportion of companies not only beating estimates but also providing reassuring guidance for the coming periods.

Per the Earnings Trends issued on Aug 2, 2023, for about 335 S&P 500 companies (i.e. 67% of total stocks) that have reported Q2 results, total earnings are down 9.8% year over year on 0.3% higher revenues, with 80.6% beating EPS estimates and 66.3% beating revenue estimates.

However, the Q2 revenue beat percentage is below other recent quarters and the 5-year average. But we have an above-average Q2 EPS beat percentage as reflected by a favorable turn in underlying earnings trends.

Against this backdrop, below, we highlight the performances of a few sector ETFs that have come across as winners in the ongoing earnings season. Notably, the SPDR S&P 500 ETF (SPY - Free Report) has added 2.8% in the past month (as of Aug 8, 2023).

Sector ETFs in Focus

SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) ) – Up 12.7% Past Month (as of Aug 8, 2023)

About 60% of the S&P 500’s energy companies have reported results so far. Of this, 88% beat on earnings and 47.1% beat on revenues. Meanwhile, oil prices have gone uphill in the past month as OPEC+ output cuts continued and demand grew. No wonder, the energy sector got the topper’s place.

Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report) ) – Up 6.1% Past Month

About 56.9% of the S&P 500 companies have reported results so far. Of this, 84.8% beat on earnings and again, 84.8% topped revenue estimates. While the sector has been facing margin issues, we highlight that the sector is safe. With several upbeat trial data for drugs coming in, the sector put up good performances in the past month.

Financial Select Sector SPDR ETF (XLF - Free Report) ) – Up 5.4% Past Month

About 81.3% of the S&P 500 companies have reported results so far. Of this, 71.6% beat on earnings and again, 71.6% surpassed on revenues. The latest quarterly results from America's major banks were crucial as they represented one full-quarter of activity after the regional banking crisis unfolded in March.

The Q2 earnings from big six banks showed higher profits in consumer banking while pressure from corporate clients acted as a spoilsport. JPMorgan, Bank of America, Citigroup, Morgan Stanley and Well Fargo beat on both lines in Q2.

Communication Services Select Sector SPDR ETF (XLC - Free Report) ) – Up 4.7% Past Month

About 56% of the S&P 500 companies have reported results so far. Of this, 86% beat on earnings and 81.4% beat on revenues. Since late July, five major tech companies from the United States released their earnings reports.

Among them, Amazon, Facebook-parent Meta and Google-parent Alphabet delivered impressive results, garnering positive reactions from investors, while Apple and Microsoft disappointed investors. While Amazon has the main focus on consumer ETFs, the others rule the tech and communication ETF space (read: "Big Tech" Earnings Review: ETFs in Focus).

Materials Select Sector SPDR ETF (XLB - Free Report) ) – Up 3.6% Past Month

About 65% of the S&P 500 companies have reported results so far. Of this, 76.9% beat on earnings and only 30.8% topped revenue estimates. Still, the space emerged as a winner with the ability to pass on the higher inflationary pressure to consumers in the form of increased raw materials costs. In fact, the sector has been standing tall this year. 

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