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4 Sector ETFs to Play on Improving Earnings Trends
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The Q2 earnings season is offering a positive picture, with an above-average number of companies surpassing consensus estimates.More significantly, a stabilizing macroeconomic environment and encouraging management commentary are helping to reverse the prior trend of downward revisions. As a result, the earnings estimates for the second half of the year are beginning to rise once again.
For the 117 S&P 500 companies that have already reported Q2 results, total earnings are up 8.3% from the same period last year on 5.3% higher revenues, with 87.2% beating EPS estimates and 80.3% beating revenue estimates, per the Earnings Trends issued on July 23, 2025.
The proportion of these 117 index members beating EPS and revenue estimates is tracking notably above the historical average for this group of companies. The Q2 EPS beat percentage of 87.2% for this group of index members compares to the 20-quarter average of 81.9% while the same on the revenues side is 80.3% vs. 70%.
Since the start of July, Q3 estimates have increased for half of the 16 Zacks sectors, including Finance, Tech, Consumer Discretionary, and even Autos and Energy.
Sector ETFs in Focus
Against this backdrop, below we highlight a few sector-based exchange-traded funds (ETFs) that should enjoy the tailwind of rising Q3 estimates and strong year-over-year growth.
For the Finance sector, we now have Q2 results from 53.3% of the sector’s market capitalization on the S&P 500 index. Total earnings for these Finance companies are up 17.3% from the same period last year on 5.5% higher revenues, with 91.2% beating EPS estimates and 79.4% beating revenue estimates.
This is a remarkably better performance from the Finance sector relative to other recent periods, with Q2 earnings growth and the percentage of revenue beats grabbing attention in particular.
For the Tech sector as a whole, Q2 earnings are expected to be +13% in Q2 on +11.8% higher revenues, which follows earnings growth of +24.2% on +11.4% higher revenues in the preceding quarter. Q3 earnings are expected to be up +6.8% from the same period last year on +9.7% higher revenues.
The tech sector is ruled by the “Magnificent -7” stocks – Apple, NVIDIA, Microsoft, Alphabet, Meta, Tesla and Amazon. Q2 earnings for the Magnificent 7 group of companies are expected to be up 11.9% from the same period last year on 11.4% higher revenues.
For the Consumer Discretionary sector, Q2 earnings are expected to be 107.9% in Q2 on 2.3% higher revenues. Q3 earnings are expected to be up 6.8% from the same period last year on 9.7% higher revenues.
For the Aerospace sector, Q2 earnings are expected to be 20.1% in Q2 on 10.4% higher revenues. The Q3 earnings are expected to surge 257.3% year over year on 9.5% higher revenues.
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4 Sector ETFs to Play on Improving Earnings Trends
The Q2 earnings season is offering a positive picture, with an above-average number of companies surpassing consensus estimates.More significantly, a stabilizing macroeconomic environment and encouraging management commentary are helping to reverse the prior trend of downward revisions. As a result, the earnings estimates for the second half of the year are beginning to rise once again.
For the 117 S&P 500 companies that have already reported Q2 results, total earnings are up 8.3% from the same period last year on 5.3% higher revenues, with 87.2% beating EPS estimates and 80.3% beating revenue estimates, per the Earnings Trends issued on July 23, 2025.
The proportion of these 117 index members beating EPS and revenue estimates is tracking notably above the historical average for this group of companies. The Q2 EPS beat percentage of 87.2% for this group of index members compares to the 20-quarter average of 81.9% while the same on the revenues side is 80.3% vs. 70%.
Since the start of July, Q3 estimates have increased for half of the 16 Zacks sectors, including Finance, Tech, Consumer Discretionary, and even Autos and Energy.
Sector ETFs in Focus
Against this backdrop, below we highlight a few sector-based exchange-traded funds (ETFs) that should enjoy the tailwind of rising Q3 estimates and strong year-over-year growth.
Finance – Vanguard Financials ETF (VFH - Free Report) – Zacks Rank #2 (Buy)
For the Finance sector, we now have Q2 results from 53.3% of the sector’s market capitalization on the S&P 500 index. Total earnings for these Finance companies are up 17.3% from the same period last year on 5.5% higher revenues, with 91.2% beating EPS estimates and 79.4% beating revenue estimates.
This is a remarkably better performance from the Finance sector relative to other recent periods, with Q2 earnings growth and the percentage of revenue beats grabbing attention in particular.
Tech – Technology Select Sector SPDR ETF (XLK - Free Report) – Zacks Rank #1 (Strong Buy)
For the Tech sector as a whole, Q2 earnings are expected to be +13% in Q2 on +11.8% higher revenues, which follows earnings growth of +24.2% on +11.4% higher revenues in the preceding quarter. Q3 earnings are expected to be up +6.8% from the same period last year on +9.7% higher revenues.
The tech sector is ruled by the “Magnificent -7” stocks – Apple, NVIDIA, Microsoft, Alphabet, Meta, Tesla and Amazon. Q2 earnings for the Magnificent 7 group of companies are expected to be up 11.9% from the same period last year on 11.4% higher revenues.
Consumer Discretionary – Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) – Zacks Rank #3 (Hold)
For the Consumer Discretionary sector, Q2 earnings are expected to be 107.9% in Q2 on 2.3% higher revenues. Q3 earnings are expected to be up 6.8% from the same period last year on 9.7% higher revenues.
Aerospace – iShares U.S. Aerospace & Defense ETF (ITA - Free Report) – Zacks Rank #2
For the Aerospace sector, Q2 earnings are expected to be 20.1% in Q2 on 10.4% higher revenues. The Q3 earnings are expected to surge 257.3% year over year on 9.5% higher revenues.