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Materials Sector to Rejoice in Q1 Earnings: ETFs to Play

Sweta Killa
·5-min read

The materials sector, which tends to be the most-sensitive to global economic growth expectations, has been performing remarkably well this year on optimism that rapid COVID-19 vaccines and more stimulus will lead to faster-than-expected economic recovery.

As such, the popular ETFs —Materials Select Sector SPDR XLB, Vanguard Materials ETF VAW, iShares U.S. Basic Materials ETF IYM and Fidelity MSCI Materials Index ETF FMAT — haverisen 14.1%, 15%, 15.4% and 15.1%, respectively, so far this year (read: Favorite Sectors of Q1 Earnings & Their Best ETFs, Stocks).

The solid trend is likely to continue as Q1 earnings unfold. Some well-known players in the space like Dow Inc. DOW, Linde plc LIN, Air Products & Chemicals APD, Newmont Corporation NEM, Ecolab Inc. ECL, and DuPont de Nemours Inc. DD will report earnings in the coming days. Let’s delve into the earnings picture of these companies that would drive the performance of these funds as these dominate their portfolio. These stocks collectively account for 50% share in IYM, 42.6% in XLB, 34.1% in VAW and 33.9% in FMAT.

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Surprise Prediction of These Stocks

Dow is expected to release earnings on Apr 22 before the opening bell. It has a Zacks Rank #1 and an Earnings ESP of +1.73%. It has seen positive earnings estimate revision of 9 cents over the past 7 days for the to-be-reported quarter and delivered earnings surprise of 20.99% in the last four quarters, on average. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The stock has a solid VGM Score of B.

Linde has a Zacks Rank #3 and an Earnings ESP of +0.57%. The company witnessed positive earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter. The stock’s earnings surprise track over the past four quarters is good with an average beat of 8.76%. The stock has a Growth Score of B. The company will report earnings on May 6 before market open.

Air Products & Chemicals has a Zacks Rank #4 and an Earnings ESP of -0.86%. It has seen negative earnings estimate revision of a penny over the past 7 days for the to-be-reported quarter and has delivered negative earnings surprise of 1.86%, on average, for the last four quarters. The stock has a Growth Score of B. The company is scheduled to report on May 10 before market open.

Newmont, which is expected to release earnings on Apr 29, has a Zacks Rank #3 and an Earnings ESP of -8.57%. It has seen negative earnings estimate revision of 5 cents over the 7 days for the to-be-reported quarter but delivered earnings surprise of 1.90%, on average, in the last four quarters. The stock has a Growth Score of A (read: Gold Regains Luster: 5 Mining ETFs on the Rise).

Ecolab is expected to release earnings on Apr 27 before the opening bell. It has a Zacks Rank #4 and an Earnings ESP of -11.04%. The stock has seen negative earnings estimate revision of couple of cents over the past month for the to-be-reported quarter and delivered negative earnings surprise of 4.05%, on average, in the last four quarters. The stock has a solid Growth Score of B.

DuPont has a Zacks Rank #2 and an Earnings ESP of +2.27%. The company saw no earnings estimate revision over the past 30 days for the to-be-reported quarter and delivered earnings surprise of 9.35%, on average, over the last four quarters. Additionally, the stock has a solid Momentum Score of A. The company is scheduled to report earnings on May 4 before the opening bell (see: all the Materials ETFs here).

Summing Up

With earnings surprises in the cards for many companies, materials ETFs might continue to see smooth trading in the weeks ahead. Further, the above-mentioned ETFs have a Zacks ETF Rank #2 (Buy), suggesting their outperformance.

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Ecolab Inc. (ECL) : Free Stock Analysis Report
 
DuPont de Nemours, Inc. (DD) : Free Stock Analysis Report
 
Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report
 
Dow Inc. (DOW) : Free Stock Analysis Report
 
Newmont Corporation (NEM) : Free Stock Analysis Report
 
SPDR-MATLS SELS (XLB): ETF Research Reports
 
Linde plc (LIN) : Free Stock Analysis Report
 
FID-MATRLS (FMAT): ETF Research Reports
 
VIPERS-MATERIAL (VAW): ETF Research Reports
 
ISHARS-US BA MA (IYM): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report