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We have dived into the in the crucial phase of the fourth-quarter earnings period this week. Over 225 companies were scheduled to report their results. This included 71 constituents of the S&P 500. By the end of this week, we will be observing fourth-quarter results from nearly 25% of the S&P 500 companies.
So far, the fourth-quarter earnings season has been moderately positive. While it hasn't been exceptionally strong, it also hasn't shown weaknesses either. Initial concerns about revenue performance in earlier reports have normalized in subsequent updates. Considering the current phase of the economic cycle, the lack of new negative developments in earnings is viewed positively and is reassuring for the market.
Focusing on the specifics, we currently have fourth-quarter results from 52 companies within the S&P 500, representing 10.4% of the index's total membership, per Earnings Trend issued on Jan 17, 2024. The combined earnings of these companies have risen 1.4% compared to the same period last year, with revenues rising by 4.8%. Moreover, a considerable 80.8% of these companies have beaten earnings per share (EPS) estimates, and 63.5% have exceeded revenue expectations.
Overall, the S&P 500 earnings is expected to rise 0.2% in Q4 of 2023 over 2.2% revenue growth. 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 2.1% so far this year (as of Jan 19, 2024).
The sector is expected to log 21.4% uptick in earnings over 3.3% growth in revenues.
Investors should note that the survey for January revealed a significant rise in consumer sentiment, reaching a high of 78.8, the most robust level since July 2021. This represents a substantial 21.4% increase from the previous year, marking the most considerable improvement over two months since 1991, as quoted on CNBC.
The sector is expected to register 18.2% rise in earnings over 5.4% growth in revenues.
In December, holiday shopping topped expectations, contributing to a strong finish for the year 2023, according to the Commerce Department's report released on Wednesday. Retail sales for the month increased by 0.6%, outperforming the Dow Jones estimate of 0.4%, as quoted on CNBC. This boost was driven by heightened activity in clothing and accessory stores as well as online non-store businesses (read: 4 ETF Areas & Stocks to Win on Upbeat December Retail Sales).
The sector is expected to post 18.7% uptick in earnings over 6.6% growth in revenues.
The tech space has been bullish lately even amid speculation about a later-than-expected Fed rate cut. The chip stocks have been in great shape due to ongoing demand for artificial intelligence. In fact, even after a superb rally in “Magnificent Seven” in 2023, the rally shows no signs of waning in 2024.
The sector is expected to record 14% increase in earnings over 1.7% advancement in revenues.
Utility companies often are debt-dependent due to their significant infrastructure investments. Lower interest rates reduce the cost of servicing this debt, improving profitability. Moreover, utilities are generally seen as stable, income-generating investments, making them attractive in a potential low-rate environment.
The sector is expected to post 8.2% increase in earnings over 3.9% advancement in revenues.
Although the big bank earnings have been mixed in the fourth-quarter earnings season, the likelihood of steepening yield curve in the near term should make the financial ETF XLF better-positioned.
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5 Sector ETF to Win in Q4 Earnings Season
We have dived into the in the crucial phase of the fourth-quarter earnings period this week. Over 225 companies were scheduled to report their results. This included 71 constituents of the S&P 500. By the end of this week, we will be observing fourth-quarter results from nearly 25% of the S&P 500 companies.
So far, the fourth-quarter earnings season has been moderately positive. While it hasn't been exceptionally strong, it also hasn't shown weaknesses either. Initial concerns about revenue performance in earlier reports have normalized in subsequent updates. Considering the current phase of the economic cycle, the lack of new negative developments in earnings is viewed positively and is reassuring for the market.
Focusing on the specifics, we currently have fourth-quarter results from 52 companies within the S&P 500, representing 10.4% of the index's total membership, per Earnings Trend issued on Jan 17, 2024. The combined earnings of these companies have risen 1.4% compared to the same period last year, with revenues rising by 4.8%. Moreover, a considerable 80.8% of these companies have beaten earnings per share (EPS) estimates, and 63.5% have exceeded revenue expectations.
Overall, the S&P 500 earnings is expected to rise 0.2% in Q4 of 2023 over 2.2% revenue growth. 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 2.1% so far this year (as of Jan 19, 2024).
Sector ETFs in Focus
Consumer Discretionary – Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
The sector is expected to log 21.4% uptick in earnings over 3.3% growth in revenues.
Investors should note that the survey for January revealed a significant rise in consumer sentiment, reaching a high of 78.8, the most robust level since July 2021. This represents a substantial 21.4% increase from the previous year, marking the most considerable improvement over two months since 1991, as quoted on CNBC.
Retail – VanEck Retail ETF (RTH - Free Report)
The sector is expected to register 18.2% rise in earnings over 5.4% growth in revenues.
In December, holiday shopping topped expectations, contributing to a strong finish for the year 2023, according to the Commerce Department's report released on Wednesday. Retail sales for the month increased by 0.6%, outperforming the Dow Jones estimate of 0.4%, as quoted on CNBC. This boost was driven by heightened activity in clothing and accessory stores as well as online non-store businesses (read: 4 ETF Areas & Stocks to Win on Upbeat December Retail Sales).
Information Technology – Technology Select Sector SPDR ETF (XLK - Free Report)
The sector is expected to post 18.7% uptick in earnings over 6.6% growth in revenues.
The tech space has been bullish lately even amid speculation about a later-than-expected Fed rate cut. The chip stocks have been in great shape due to ongoing demand for artificial intelligence. In fact, even after a superb rally in “Magnificent Seven” in 2023, the rally shows no signs of waning in 2024.
Utilities – Vanguard Utilities ETF (VPU - Free Report)
The sector is expected to record 14% increase in earnings over 1.7% advancement in revenues.
Utility companies often are debt-dependent due to their significant infrastructure investments. Lower interest rates reduce the cost of servicing this debt, improving profitability. Moreover, utilities are generally seen as stable, income-generating investments, making them attractive in a potential low-rate environment.
Finance – Financial Select Sector SPDR ETF (XLF - Free Report)
The sector is expected to post 8.2% increase in earnings over 3.9% advancement in revenues.
Although the big bank earnings have been mixed in the fourth-quarter earnings season, the likelihood of steepening yield curve in the near term should make the financial ETF XLF better-positioned.