Q2 Earnings Effect: 4 Must-See ETF Charts

Second-quarter earnings have been faring well, giving an upward thrust to stocks, especially the blue chips. In fact, the blue chip index — Dow Jones — crossed the 22,000 milestone for the first time on robust earnings (read: Dow at Record High: More Upside for ETFs?).

Earnings for 86.7% of the S&P 500 index’s total market capitalization reported so far are up 11.6% from the same period last year on 5.6% higher revenues, with 74.3% beating EPS estimates and 68.3% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is tracking above historical periods.

Below, we have highlighted some major takeaways from the strong earnings season and their impact on the ETF world:

Earnings vs. Revenue

Though earnings and revenue growth are lower than the prior quarter for the same group of companies, total Q2 earnings in dollar terms are on track to reach a new quarterly all-time record for the index, surpassing the previous record achieved in the fourth quarter of 2016. Revenue surprise is also tracking above historical periods (read: 4 Sector ETFs Winning on Revenue Growth).

As a result, both WisdomTree Earnings 500 Fund (TO:EPS) and Oppenheimer Large Cap Revenue ETF (V:RW) L) are in the spotlight. EPS provides exposure to the earnings-generating companies within the large-cap segment of the broad U.S. stock market while RWL targets the top revenue-generating companies within the large-cap segment of the broad U.S. stock market. Both funds gained nearly 2% over the past one month.


Energy Powers Q2 Growth

While growth has been the broad based, energy so far has been the biggest contributor to Q2 earnings with growth of 313.3% in earnings and 16.5% in revenues. On an ex-energy basis, overall Q2 earnings growth would fall to 9.1% on 4.5% higher revenues.

Given this, VanEck Vectors Solar Energy ETF (NYSE:XLE) KWT and VanEck Vectors Coal ETF KOL are the winners in this space, gaining 11.9% and 11%, respectively. KWT offers exposure to the fastest-growing source of renewable and overall energy while KOL measures the performance of companies in the global coal industry, which includes coal operation (production, mining, and cokeries), transportation of coal, production of coal mining equipment as well as from storage and trade.


Aerospace & Materials Reveal Biggest Earnings Surprise

With 90% of the companies in both the sectors having reported so far, aerospace and materials came up with 88.9% of earnings beat, which is encouraging. The ultra-popular iShares U.S. Aerospace & Defense ETF (HM:ITA) having AUM of $3.6 billion, was up 5.8% over the past one month . It provides exposure to U.S. companies that manufacture commercial and military aircrafts and other defense equipment.

Meanwhile, mining has been leading the materials space this earnings season with Global X Copper Miners ETF COPX stealing the show, rising 18.8% in last one-month period. This product provides global access to a broad range of copper mining companies (read: 5 Best Stocks of the July ETF Winner).


Technology Tops on Revenue Beat

Of about 86.2% of the market cap of the technology sector that has reported so far, 87% has surprised on the top line. Investor should note that the sector has been on fire and is the best-performing space this year amid concerns over stretched valuations. A rising rate environment, improving industry fundamentals, and emerging technologies such as wearables, VR headsets, drones, virtual reality devices, and artificial intelligence are the key catalysts to the sector’s growth. Apart from this, weakness in dollar has helped tech companies to exploit their revenues overseas in Q2 (read: If Dollar Remains Weak, Bet on These ETFs & Stocks).

ARK Web x.0 ETF ARKW and PowerShares Nasdaq Internet Portfolio PNQI gained over 8% over the past one month. ARKW focuses on companies tied to innovation and is expected to benefit from shifting the bases of technology infrastructure to cloud, enabling mobile, new and local services. On the other hand, PNQI offers exposure to the broad internet industry. ARKW has a lower level of $ 68.7 million in AUM while PNQI has $462.9 million in AUM.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>