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5 Sector ETFs to Benefit from Q1 Revenue Growth

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As the Q1 reporting cycle is drawing to a close, investors must be interested in finding out the performance of the Zacks classified 16 sectors of the S&P 500. While such performance evaluation normally brings attention to the bottom line, sales growth demands equal attention. We’ll tell you why.

Investors should note that sales are harder to be influenced in an income statement than earnings. A company can land up on decent earnings numbers by adopting cost-cutting or some other measures that do not speak of its core strength. But it is harder for a company to mold its revenue figure.

So far, 99.2% of the S&P 500 market cap and 98.6% of the companies have come up with their first-quarter 2018 reports. Total earnings for the first quarter are expected to grow 24.3% from the same period last year on 8.% higher revenues, per the Earnings Trends issued on May 31, 2018. Around 74.4% of the companies beat on the top line while 76.9% surpassed earnings estimates.

Below, we highlight four sectors and their related stocks that could be used to book some profits on double-digit revenue growth potential.


The sector is expected to witness the highest revenue growth of 22.4% in the ongoing earnings season. On top of it, about 73.7% companies beat on revenue estimates. The materials sector is best positioned to take advantage of President Trump’s fiscal reflation. Moreover, the President’s “America First” push means more manufacturing in the U.S. territory, which should create greater need for materials. This makes First Trust Materials AlphaDEX Fund FXZ an intriguing pick.


The sector is expected to record 20.3% revenue growth in Q1, with 84.6% companies beating revenue estimates. After all, Trump’s pro-industrial agenda and upbeat U.S. economic growth gave a boost to the sector. This makes PowerShares Dynamic Building & Construction Portfolio PKB worth a look (read: Solid Small-Cap Earnings Put Spotlight on These Sector ETFs).


Though the Trump rally seems to have passed its best period, industrial stocks (one of best Trump beneficiaries) can see a few more days of bull run. All companies have reported their Q1 earnings. The sector logged 16.1% revenue growth while 79.2% companies surpassed revenue estimates. Investors can take a look at iShares Edge MSCI Multifactor Industrials ETF INDF.


Prolonged oil woes appear to be reaching an end. This year oil prices have been on a steady ascent on talks of an extension in the OPEC output deal, U.S. sanctions against Iran and Venezuela, and reports of U.S. crude inventory draws.

The energy sector logged 14.2% expansion in Q1 of 2018, the fourth highest among the Zacks classified 16 sectors under the S&P 500 index. Around 70% of the companies registered revenue beat. First Trust Nasdaq Oil & Gas ETF FTXN can be watched in this regard (read: Oil & Energy ETFs on 52-Week High on Venezuela Tension).


The technology sector has been positioned strongly thanks to improving economic and industry fundamentals and Trump’s corporate tax reform. About 98.4% of the companies have reported results so far. The sector is expected to witness revenue growth of 13% in Q1 earnings, with 90.2% of the companies exceeding sales estimates. This can be a reason to look at iShares U.S. Technology ETF (IYW - Free Report) (read: Let Your Portfolio Mirror Buffett's With These ETF Strategies).

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