XOP SPDR S&P Oil and Gas Exploration and Production

The Q1 2014 earnings season is currently in the halfway mark and the growth picture looks uninspiring, with lack of top-line surprises and weak management guidance for the second quarter (read: 3 Hit and Flop ETFs of April).

Total earnings for the S&P 500 companies that have reported so far are up 1.4% on an annual basis with a beat ratio of 68% while revenues have increased 2.2% with a beat ratio of 44.1%. While the earnings beat ratio is trending better than the recent quarterly averages, the revenue beat ratio is lagging.  

From a sector perspective, utilities is the star performer, having delivered the highest earnings median surprise of 8.3% and revenue surprise of 9.1%. The sector is also the key contributor to earnings and revenues, accounting for 19.9% of overall earnings growth with beat ratio of 80% and revenue growth of 10.9% with beat ratio of 72% (see: all the utilities ETFs here).

On the other hand, autos remained the biggest laggard on the earnings front as 100% of the sector’s market cap has reported, with earnings declining 22.1% on 2.1% higher revenues. If we go only by earnings beat ratio, conglomerates have fared better with 83.3% ratio followed by 81% for consumer discretionary as per the Zacks Earnings Trends.

Considering all the key metrics, several equity ETFs have impressed with their performances and generated handsome returns over the trailing one month. While there are winners in every corner of the space, below we have highlighted the top three ETFs that buoyed up on robust earnings results and are easily leading the broad market in the same time period:

SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

This fund follows the S&P Oil & Gas Exploration & Production Select Industry Index, holding 84 stocks in its portfolio. It has amassed $915.7 million in its asset base and trades in heavy volume of more than 4.5 million shares per day. The ETF charges 35 bps in annual fees from investors (read: Energy Exploration ETFs: A Bright Spot in The Choppy Market).

The product provides equal weight exposure across a number of firms as none holds more than 1.9% of total assets. Further, it is widely diversified across various market caps – small caps (42%), large caps (32%) and mid caps (26%). However, more than three-fourths of the portfolio goes to the exploration and production firms while refining and marketing, and integrated oil & gas take the remainder.

The ETF gained over 6% in the trailing one-month period and has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook.

SPDR S&P Pharmaceuticals ETF (XPH)

This fund provides exposure to the pharma segment of the broad healthcare space by tracking the S&P Pharmaceuticals Select Industry Index. The product has AUM of about $852.7 million and trades in volume of more than 123,000 a day. It charges 35 bps a year in fees from investors.

Holding 34 securities in its basket, the product is well spread across each security as none of these holds more than 4.52% share in the basket. In addition, the ETF is also diversified across various market caps with large caps accounting for 45% and small and mid caps making up for 36% and 19%, respectively.

The product added over 6% over the past month and has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with Medium risk outlook (read: Pharma ETFs: A Safe Haven from the Biotech Stock Slump?).

First Trust ISE-Revere Natural Gas Index Fund (FCG)

This ETF offers exposure to the U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows the ISE-REVERE Natural Gas Index and holds 30 stocks in its basket, which are well spread out across a single component as none of these holds more than 5.37% of assets.

Like the other two, this ETF has also diversified across various market cap levels with 44% in large caps, 38% in small caps and the rest in mid caps. The fund has amassed $539 million in its asset base while sees solid volume of nearly 516,000 shares per day. Expense ratio came in at 0.60%.

FCG was up about 5.2% over the trailing one month and has a Zacks ETF Rank of 3 or ‘Hold’ rating with High risk outlook.

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FT-ISE R NAT GA (FCG): ETF Research Reports
 
SPDR-SP O&G EXP (XOP): ETF Research Reports
 
SPDR-SP PHARMA (XPH): ETF Research Reports
 
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