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Energy, which was the biggest drag on the earnings growth picture over the past two years, appears to have made a strong comeback after eight quarters of decline. This is especially true as total earnings from 73.1% of the sector’s total market capitalization reported so far are up 19.4% on 3.4% higher revenues, as per the latest Earnings Preview.
Additionally, earnings and revenue surprises of 60% and 66.7%, respectively, were impressive. Notably, the energy sector is the second largest contributor to Q4 total S&P 500 earnings growth so far, trailing utilities. However, solid results were unable to push up the price of energy stocks as these are down by an average of 1.5% versus 0.1% loss for the S&P 500 in response to earnings announcements.
The largest U.S. oil company, Exxon Mobil, reported earnings per share of 90 cents, trumping the Zacks Consensus Estimate by 18 cents and improving from the year-ago earnings of 67 cents. Total revenue rose 2% year over year to $61.0 billion and was ahead our $60.6 billion estimate. The stock is down 0.1% since the earnings announcement on January 31.
Chevron, which trails Exxon Mobil, reported lower-than-expected results buoyed by lower refining margins. Earnings per share came in at 22 cents, sharply below the Zacks Consensus Estimate of 64 cents but higher than the year-ago earnings of 31 cents. Revenues rose 8% year over year to $31.5 billion but fell short of our estimate of $32.6 billion. Shares of XOM dropped 3.1% since its earnings release on October 28.
Investors should note that both the stocks have a Zacks Rank #3 (Hold) with a VGM Style Score of C and fall in the poor industry ranking, having a Zacks Rank in the bottom 13%.
ETFs in Focus
As solid sector earnings failed to energize stock price, ETFs also saw rough trading over the past 10 days. Below we have highlighted four funds with the largest allocation to these energy behemoths. These funds lost nearly 1.3% over the past 10 days and have a Zacks ETF Rank #3 (see: all the energy ETFs here).
This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to the broad energy space. It holds 71 stocks in its basket with AUM of $1.3 billion and average daily volume of more than 1.1 million shares. The product charges 44 bps in fees per year from investors. Exxon Mobil and Chevron occupy the top two positions in the basket taking the bigger chunk of assets at 22% and 13.6%, respectively. From a sector perspective, integrated oil & gas makes up for 39% share while oil exploration & production, and oil equipment & services round off the next two spots with a double-digit exposure each.
This is the largest and most popular ETF in the energy space with AUM of $17.6 billion and average daily volume of around 14.7 million shares per day. Expense ratio comes in at 0.14%. The fund follows the Energy Select Sector Index and holds 36 securities in its basket. XOM and CVX occupy the top two spots with 15.8% and 14.8% share, respectively. In terms of industrial exposure, oil, gas & consumable fuels accounts for nearly 81.5% of the portfolio while energy equipment & services takes the remainder.
The fund follows the MSCI USA IMI Energy Index, holding 120 stocks in its basket. Out of these, XOM and CVX take the top two spots at 21.4% and 13.2%, respectively. In terms of industrial exposure, oil, gas & consumable fuels accounts for nearly 81.4% of the portfolio while energy equipment & services takes the remainder. The product charges 8 bps in annual fees and trades in good volume of about 194,000 shares. It has accumulated $518.9 million in its asset base (read: Energy ETFs Set to Soar This Earnings Season).
This fund manages about $4.4 billion in asset base and provides exposure to a basket of 131 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees good volume of about 243,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the top firms with 22% and 13.2% allocation, respectively. Though the product is skewed toward the integrated oil & gas sector with 38.5% of assets, oil exploration and production, and oil equipment services also provide a nice mix in the portfolio with double-digit exposure each.
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Solid Sector Earnings Fail to Boost Energy ETFs
Energy, which was the biggest drag on the earnings growth picture over the past two years, appears to have made a strong comeback after eight quarters of decline. This is especially true as total earnings from 73.1% of the sector’s total market capitalization reported so far are up 19.4% on 3.4% higher revenues, as per the latest Earnings Preview.
Additionally, earnings and revenue surprises of 60% and 66.7%, respectively, were impressive. Notably, the energy sector is the second largest contributor to Q4 total S&P 500 earnings growth so far, trailing utilities. However, solid results were unable to push up the price of energy stocks as these are down by an average of 1.5% versus 0.1% loss for the S&P 500 in response to earnings announcements.
In particular, the two U.S. supermajor oil producers – Exxon Mobil (XOM - Free Report) and Chevron (CVX - Free Report) – came up with varied results. While XOM beat our earnings and revenue estimates, CVX lagged our expectations (read: 4 Top Performing Energy ETFs & Stocks of 2016).
Earnings in Focus
The largest U.S. oil company, Exxon Mobil, reported earnings per share of 90 cents, trumping the Zacks Consensus Estimate by 18 cents and improving from the year-ago earnings of 67 cents. Total revenue rose 2% year over year to $61.0 billion and was ahead our $60.6 billion estimate. The stock is down 0.1% since the earnings announcement on January 31.
Chevron, which trails Exxon Mobil, reported lower-than-expected results buoyed by lower refining margins. Earnings per share came in at 22 cents, sharply below the Zacks Consensus Estimate of 64 cents but higher than the year-ago earnings of 31 cents. Revenues rose 8% year over year to $31.5 billion but fell short of our estimate of $32.6 billion. Shares of XOM dropped 3.1% since its earnings release on October 28.
Investors should note that both the stocks have a Zacks Rank #3 (Hold) with a VGM Style Score of C and fall in the poor industry ranking, having a Zacks Rank in the bottom 13%.
ETFs in Focus
As solid sector earnings failed to energize stock price, ETFs also saw rough trading over the past 10 days. Below we have highlighted four funds with the largest allocation to these energy behemoths. These funds lost nearly 1.3% over the past 10 days and have a Zacks ETF Rank #3 (see: all the energy ETFs here).
iShares U.S. Energy ETF (IYE - Free Report)
This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to the broad energy space. It holds 71 stocks in its basket with AUM of $1.3 billion and average daily volume of more than 1.1 million shares. The product charges 44 bps in fees per year from investors. Exxon Mobil and Chevron occupy the top two positions in the basket taking the bigger chunk of assets at 22% and 13.6%, respectively. From a sector perspective, integrated oil & gas makes up for 39% share while oil exploration & production, and oil equipment & services round off the next two spots with a double-digit exposure each.
Energy Select Sector SPDR (XLE - Free Report)
This is the largest and most popular ETF in the energy space with AUM of $17.6 billion and average daily volume of around 14.7 million shares per day. Expense ratio comes in at 0.14%. The fund follows the Energy Select Sector Index and holds 36 securities in its basket. XOM and CVX occupy the top two spots with 15.8% and 14.8% share, respectively. In terms of industrial exposure, oil, gas & consumable fuels accounts for nearly 81.5% of the portfolio while energy equipment & services takes the remainder.
Fidelity MSCI Energy Index ETF (FENY - Free Report)
The fund follows the MSCI USA IMI Energy Index, holding 120 stocks in its basket. Out of these, XOM and CVX take the top two spots at 21.4% and 13.2%, respectively. In terms of industrial exposure, oil, gas & consumable fuels accounts for nearly 81.4% of the portfolio while energy equipment & services takes the remainder. The product charges 8 bps in annual fees and trades in good volume of about 194,000 shares. It has accumulated $518.9 million in its asset base (read: Energy ETFs Set to Soar This Earnings Season).
Vanguard Energy ETF (VDE - Free Report)
This fund manages about $4.4 billion in asset base and provides exposure to a basket of 131 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees good volume of about 243,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the top firms with 22% and 13.2% allocation, respectively. Though the product is skewed toward the integrated oil & gas sector with 38.5% of assets, oil exploration and production, and oil equipment services also provide a nice mix in the portfolio with double-digit exposure each.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>