Energy appeared to be the weakest sector at the start of the Q3 reporting cycle. Total Q3 earnings of 55% of the sector’s total market cap in the S&P 500 Index are down 23.8% from the same period last year on 0.4% lower revenues. Earnings beat ratio is 50% while the revenue beat ratio is 37.5% at this stage.
However, two U.S. supermajor oil producers — Exxon Mobil (XOM - Free Report) and Chevron (CVX - Free Report) — came up with robust results. Exxon Mobil and Chevron beat on earnings but missed on revenues (read: 5 Best Sector ETFs of October With Double-Digit Returns).
Earnings in Focus
The largest U.S. oil producer, Exxon Mobil, reported earnings per share of 68 cents, which outpaced the Zacks Consensus Estimate of 64 cents but declined from the year-ago earnings of $1.46. Revenues dropped 15.1% year over year to $65.05 billion and fell shy of the estimated figure of $67.87 billion.
Chevron topped earnings per share by 12 cents. Earnings per share of $1.59 were lower than the year-ago earnings of $2.11. Revenues declined 17.9% year over year to $36.12 billion and lagged the estimated $39.06 billion (read: Energy ETFs Are Scary Enough to Dump Ahead of Halloween).
ETFs in Focus
Given this, investors might want to tap energy ETFs having the largest allocation to these energy behemoths. Below we have highlighted some of them in detail.
Energy Select Sector SPDR (XLE - Free Report)
This is the largest and most-popular ETF in the energy space with AUM of $10.2 billion and average daily volume of around 14.6 million shares per day. Expense ratio is 0.13%. The fund follows the Energy Select Sector Index and holds 28 securities in its basket. XOM and CVX occupy the top two spots with 22.3% and 21.2% share, respectively. XLE has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook (read: Q3 Energy Earnings Likely to Disappoint: ETFs to Avoid).
iShares U.S. Energy ETF (IYE - Free Report)
This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 48 stocks in its basket with AUM of $599.6 million and average daily volume of about 426,000 shares. The product charges 42 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 24.4% and 18.8%, respectively. The product has a Zacks ETF Rank #5 with a High risk outlook.
Vanguard Energy ETF (VDE - Free Report)
This fund manages about $3.1 billion in asset base and provides exposure to a basket of 136 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees a good volume of about 290,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the top firms with 22.3% and 18.1% allocation, respectively. VDE carries a Zacks ETF Rank #5 with a High risk outlook (see: all the Energy ETFs here).
Fidelity MSCI Energy Index ETF (FENY - Free Report)
The fund follows the MSCI USA IMI Energy Index, holding 126 stocks in its basket. Out of these, XOM and CVX take the top two spots at 23.4% and 17.6%, respectively. The product charges 8 bps in annual fees and trades in a good volume of around 207,000 shares. It has accumulated $417.9 million in its asset base and has a Zacks ETF Rank #5 with a High risk outlook.
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