This Earnings Season’s 5 Favorite Sectors and Their ETFs

The Q2 2024 earnings season is set to kick off this week, with banking players set to report their results. The overall picture heading into this reporting cycle is one of continued resilience and a steadily improving outlook with a favorable revision trend.

Total S&P 500 earnings are expected to rise 8.6% from the same period a year ago on 4.7% higher revenue, in line with the latest earnings trends. That would be the highest rate of earnings growth since the 9.9% increase in the first quarter of 2022. While estimates have been steadily declining since the beginning of the quarter, the magnitude of the declines was much smaller compared with comparable periods in other recent quarters.

Of the 16 Zacks sectors, nine are expected to post second-quarter earnings growth, with Technology posting the strongest gains (15.8%), followed by Healthcare (19.0%), Energy (10.9%), Consumer Discretionary (12.5%), and Financials (9.0%). In particular, the “Magnificent 7” companies are expected to see second-quarter earnings rise 25.5% from the same period last year on revenue up 13.2% (read: 5 Must-Have ETFs for the Second Half).

Energy sector profit growth is on track to turn positive in the second quarter after remaining negative for the previous four quarters.

With that in mind, we’ve highlighted one ETF from each of the sectors mentioned above that could prove to be a great option as earnings season approaches.

Technology: Roundhill Magnificent Seven ETF (MAGAZINES)

Roundhill Magnificent Seven ETF is the first-ever ETF to offer investors equal-weight exposure to the Magnificent Seven stocks. It has accumulated $620.3 million in its asset base and charges 29 basis points in fees annually. MAGS trades an average of 200,000 shares per day (read: 5 Sector ETFs That Beat the Market in Q2).

Healthcare: Healthcare Sector Relief Fund (SPDR)XLV)

Health Care Select Sector SPDR Fund is the most popular healthcare ETF with $38.4 billion in AUM and average daily volume of 6.5 million shares. It tracks the Health Care Select Sector Index and has 63 securities in its basket. Pharma has the largest weighting at 32.8% by sector, while healthcare providers and services, medical equipment and supplies, biotechnology, and life sciences tools and services have double-digit exposure.

The Health Care Select Sector SPDR fund charges an annual fee of 9 basis points and has a Zacks ETF Rank #1 (Strong Buy) with a medium risk outlook

Energy: Vanguard Energy ETF (VDE)

Vanguard Energy ETF provides exposure to a basket of 115 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. Integrated oil and gas companies account for the largest allocation at 37.8%, followed by Oil & Gas Exploration & Production (28.5%), Oil & Gas Refining & Marketing (11.2%), Oil & Gas Storage & Transportation (10.8%), Oil & Gas Equipment & Services (10%).

Vanguard Energy ETF has amassed $8.5 billion in its asset base and has a good volume of about 377,000 shares. It charges 10 bps annual fees and has a Zacks ETF Rank #1 with a high-risk outlook (read: Oil Heads for Best Week in 2 Months: Energy ETFs in Focus).

Discretionary Consumption: iShares US Consumer Services ETF (International Youth Day)

iShares US Consumer Discretionary ETF offers exposure to U.S. companies that distribute food, drugs, retail, and media, tracking the Russell 1000 Consumer Disc 40 Act 15/22.5 Daily Capped Index. It has 176 stocks in its basket, with key positions in consumer discretionary, consumer services, autos and components, media and entertainment, and consumer distribution and retail.

iShares US Consumer Discretionary ETF has accumulated $1 billion in its asset base and trades an average of 75,000 shares per day. It charges investors 40 basis points in annual fees. IYC has a Zacks ETF Rank #3 (Hold) with a medium risk outlook.

Finance: Financial Sector Select SPDR Fund (XLF)

The ultra-popular Financial Select Sector SPDR Fund ETF aims to provide exposure to 71 companies across a diverse range of financial services, insurance, banks, capital markets, real estate mortgage mutual funds, consumer finance, and savings and mortgage finance. It tracks the Financial Select Sector Index, charging investors 9 basis points per year.

Financial Select Sector SPDR Fund has an AUM of $40 billion and trades an average of 37 million shares per day. It has a Zacks ETF Rank #1 with a Medium Risk Outlook.

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