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Earnings and Coronavirus Impact: 5 Best ETF Charts

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The fourth-quarter reporting cycle has shown steady improvement with earnings growth on track to turn positive and an above-average proportion of companies beating top-line expectations. Earnings for nearly 89% of the S&P 500 Index market capitalization are up 1.1% on 4.6% revenue growth, with 73% beating EPS estimates and 65.7% surpassing top-line expectations, according to the latest Earnings Trends.

While the proportion of companies beating fourth-quarter EPS estimates is tracking below the same group of companies in the recent quarters, the revenue beat percentage is notably above historical periods.

Additionally, first-quarter 2020 earnings estimates have been holding up well despite the coronavirus impact. The coronavirus outbreak has now spread outside China with an unexpected surge in confirmed infections in South Korea, Italy and Iran. According to the latest figures from the World Health Organization, there are now 79,407 cases of COVID-19 — official name given to coronavirus —  in 32 countries and 2,622 related deaths (read: ETFs to Invest in as Coronavirus Fears Accelerate).  

The spike in the number of cases has raised fresh worries that the outbreak could threaten to derail global growth resulting in a broad market sell-off this week. In particular, a growing number of companies have warned that the deadly virus will prevent them from meeting sales or profit targets for the first three months of the year. Though first-quarter estimates have come down, the negative revisions still compare favorably with other recent periods.

While the virus impact has led to decline in many corners of the space, several equity ETFs impressed with their performances on robust earnings results. Below are five ETFs that have generated handsome returns over the past month. In addition, we have given a chart for their one-month performance and compared them with the broad market fund (SPY - Free Report) and the broad sector.

Invesco Solar ETF (TAN - Free Report)

This ETF offers global exposure to global solar stocks by tracking the MAC Global Solar Energy Index. It has gained 13.3% over the past month on strong fourth-quarter earnings. In particular, upbeat earnings from Enphase Energy (ENPH - Free Report) and SolarEdge Technologies (SEDG - Free Report) led to a strong rally in the ETF. The two stocks make up for a combined 21.7% share in the basket. TAN has a Zacks ETF Rank #2 (Buy) with a High risk outlook. Overall, the solar industry came up with a 67% earnings beat in the fourth quarter and has returned 20.8% in a month (read: Why Clean Energy ETFs Are Shining).



 

MicroSectors FANG+ ETN (FNGS - Free Report)

This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly-traded growth stocks of next generation technology and tech-enabled companies. A slew of strong earnings results from the stocks in the index such as Apple (AAPL), Amazon (AMZN), Netflix (NFLX), Alibaba Group (BABA), Tesla (TSLA), and Nvidia (NVDA) led to strong trading in the ETF, which is up 3.8% in a month.



First Trust Utilities AlphaDEX Fund (FXU - Free Report)

This fund targets the utilities segment of the broad stock market and follows the StrataQuant Utilities Index. Total earnings from 57.8% of the sector’s total market capitalization are up 27.3% on 0.1% lower revenues, with 69.2% of the companies beating on earnings and 7.7% exceeding top-line estimates. Notably, the sector’s earnings growth rate is the highest of all the sectors so far this earnings season. As a result, FXU has gained 1.9% in a month and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Utility ETFs Gain Despite Mixed Q4 Earnings).



VanEck Vectors Gold Miners ETF (GDX - Free Report)

This fund provides investors with exposure to companies involved in the gold mining industry. Holding 47 stocks in its basket, it has climbed 2.6% in the same time frame. In particular, results of Barrick Gold (GOLD), Agnico Eagle Mines (AEM) and Kinross Gold (KGC) have been solid, while others like Newmont Corporation (NEM) beat earnings estimates but missed on revenues. Overall, the gold mining industry came up with 53% earnings beat in the fourth quarter (read: Gold to Hit $2000 Soon? ETFs to Bet On).



VanEck Vectors Biotech ETF (BBH - Free Report)

This ETF offers exposure to a basket of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. Total earnings for 96% of the total healthcare market capitalization are up 7.9% on revenue growth of 6.5%, with 77.3% beating EPS and 72.7% topping revenue estimates. Notably, revenue beat ratio is encouraging compared to the other sectors. The ETF is up 1% in a month and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Can Biotech ETFs Gain on Mixed Q4 Earnings Results?).



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