Energy ETFs Fall On Dismal Exxon Mobil, Chevron Earnings

The earnings picture for the energy sector is shaping up remarkably well. Energy once again is expected to be the biggest contributor to the S&P 500 earnings growth with total earnings for the sector expected to be up 146% from the same period last year on 23.1% higher revenues.

However, reports from two U.S. supermajor oil producers, Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) , on Feb 2 led to negative reactions in the broad energy space. Both XOM and CVX missed the earnings estimate while the latter beat on the top line (read: Oil Sees Strong Start to 2018 in 4 Years: ETFs to Play).

Earnings in Focus

The largest U.S. oil company, Exxon Mobil, reported earnings per share of 88 cents, falling short of the Zacks Consensus Estimate of $1.06 and declining from the year-ago earnings of 90 cents. Revenues climbed 18% year over year to $66.51 billion and fell shy of the estimated $74.44 billion. The stock shed 5% on disappointing results.

Chevron, which trails Exxon Mobil, reported mixed results. Earnings per share came in at 73 cents, 54 cents below the Zacks Consensus Estimate but higher than the year-ago earnings of 22 cents. Revenues rose 19.4% year over year to $37.62 billion and edged past the estimated $37.55 billion. Shares of CVX were down 5.6% on the day.

Investors should note that both stocks have a Zacks Rank #3 (Hold) and belong to a top-ranked Zacks industry (top 11%).

ETFs in Focus

The dismal earnings report and falling stock prices led to terrible trading for energy ETFs having the largest allocation to these behemoths on the day. These funds also have a Zacks ETF Rank #3 (see: all the energy ETFs here).

iShares U.S. Energy ETF (NYSE:XLE) IYE

This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to the broad energy space. It holds 67 stocks in its basket with AUM of $1.2 billion and average daily volume of about 405,000 shares. The product charges 44 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 23.2% and 14.6%, respectively. The product has lost 4.3% following the results from two oil giants.

Energy Select Sector SPDR XLE

This is the largest and most popular ETF in the energy space with AUM of $19.8 billion and average daily volume of around 12.3 million shares per day. Expense ratio comes in at 0.13%. The fund follows the Energy Select Sector Index and holds 32 securities in its basket. XOM and CVX occupy the top two spots with 23.3% and 16.5% share, respectively. The ETF was down 4.1% (read: Energy ETFs & Stocks Soaring to Start 2018).

iShares Edge MSCI Multifactor Energy ETF ERGF

This ETF follows the MSCI USA Energy Diversified Multiple-Factor Capped Index and targets companies with the potential to outperform the broad U.S. energy sector. Holding 22 stocks in its basket, XOM and CVX are the top two firms with 23% and 17.6% allocation, respectively. The product has accumulated $2.9 million in its asset base and trades in a paltry volume of 1,000 shares per day on average. It charges 35 bps in annual fees and lost 4.5% post results.

Fidelity MSCI Energy Index ETF FENY

The fund follows the MSCI USA IMI (LON:IMI) Energy Index, holding 130 stocks in its basket. Out of these, XOM and CVX take the top two spots at 22.4% and 14%, respectively. The product charges 8 bps in annual fees and trades in a good volume of more than 235,000 shares. It has accumulated $592.2 million in its asset base and shed 4.3% on the day.

Vanguard Energy ETF VDE

This fund manages about $4.4 billion in asset base and provides exposure to a basket of 142 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees a good volume of about 272,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the top firms with 21.6% and 14.9% allocation, respectively. VDE is down 4.3% following the results.

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SPDR-EGY SELS (XLE): ETF Research Reports

ISHARS-US EGY (IYE): ETF Research Reports

FID-ENERGY (FENY): ETF Research Reports

VIPERS-ENERGY (VDE): ETF Research Reports

Chevron Corporation (CVX): Free Stock Analysis Report

Exxon Mobil Corporation (XOM): Free Stock Analysis Report

ISHRS-EMS M EGY (ERGF): ETF Research Reports

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