Energy earnings have been strong with the overall sector gaining 3.2% in response to earnings announcement. This makes it the fourth best-performing sector so far this earnings season. Total Q4 earnings from 60.8% of the sector’s total market cap in the S&P 500 Index is up 87.2% from the same period last year on 9.3% higher revenues. Both earnings and revenue beat ratio is 70% at this stage.
In particular, two U.S. supermajor oil producers — Exxon Mobil (XOM - Free Report) and Chevron (CVX - Free Report) — strengthened the optimism in the energy sector, already rallying due to rising oil price. Both giants beat earnings estimates while Exxon Mobile lagged the same on revenues (read: Oil Heads for Biggest 2-Year Weekly Gain: 5 Top ETFs, Stocks).
Earnings in Focus
The largest U.S. oil company, Exxon Mobil reported earnings per share of $1.51, comprehensively beating the Zacks Consensus Estimate of $1.08 and improving from the year-ago earnings of 88 cents. Revenues climbed 8.1% year over year to $71.89 billion but fell short of the estimated figure of $74.18 billion.
Chevron topped earnings per share by 19 cents. Earnings per share of $2.06 were also higher than 73 cents earned in the year-ago period. Revenues rose 12.5% year over year to $42.3 billion and outpaced the estimated $41.6 billion (see: all the energy ETFs here).
Both the stocks gained following strong quarterly results with XOM gaining 3.6% and CVX climbing 3.2%. Exxon currently carries a Zacks Rank #5 (Strong Sell) and has a VGM Score of B, while Chevron has a Zacks Rank #3 (Hold) and a VGM Score of B. The duo belongs to a bottom-ranked Zacks industry (bottom 3%).
ETFs in Focus
Given this, investors might want to tap energy ETFs having the largest allocation to these behemoths. Below we have highlighted some of them in detail. These ETFs have gained more than 13% so far this year.
Energy Select Sector SPDR (XLE - Free Report)
This is the largest and most popular ETF in the energy space with AUM of $13.3 billion and average daily volume of more than 17 million shares per day. Expense ratio comes in at 0.13%. The fund follows the Energy Select Sector Index and holds 30 securities in its basket. XOM and CVX occupy the top two spots with 21.5% and 18.4% share, respectively. XLE has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: 4 Sector ETF & Stock Picks to Bet on Ahead of Q4 Earnings).
iShares U.S. Energy ETF (IYE - Free Report)
This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to the U.S. companies that produce and distribute oil and gas. It holds 69 stocks in its basket with AUM of $860.4 million and average daily volume of about 742,000 shares. The product charges 43 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 23.1% and 16.5%, respectively. The product has a Zacks ETF Rank #3 with a High risk outlook.
Vanguard Energy ETF (VDE - Free Report)
This fund manages about $3.6 billion in asset base and provides exposure to a basket of 141 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees a good volume of about 398,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the top firms with 22.7% and 16.4% allocation, respectively. VDE carries a Zacks ETF Rank #2 with a High risk outlook (read: Top ETF Stories of January).
Fidelity MSCI Energy Index ETF (FENY - Free Report)
The fund follows the MSCI USA IMI Energy Index, holding 133 stocks in its basket. Out of these, XOM and CVX take the top two spots at 22.2% and 15.7%, respectively. The product charges 8 bps in annual fees and trades in a good volume of around 342,000 shares. It has accumulated $482.4 million in its asset base and has a Zacks ETF Rank #3 with a High risk outlook.
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