What’s In Store For Material ETFs In Q1 Earnings?

The materials sector has been one of the top performing sectors of this year thanks to rebounding commodity prices, positive developments in China, pick-up in global manufacturing activities and improving global trends. Additionally, Trump’s pro-growth policies to revive U.S. manufacturing and rehabilitate the country’s aging infrastructure added to its strength.

The President-elect has proposed to spend a trillion dollars on infrastructure by rebuilding highways, bridges, hospitals and other infrastructure projects over 10 years.

As a result, Materials Select Sector SPDR (XLB – Free Report) , Vanguard Materials ETF (VAW – Free Report) , iShares U.S. Basic Materials ETF (IYM – Free Report) , and Fidelity MSCI Materials Index ETF (FMAT – Free Report) have gained in mid-single digits so far this year. Will this trend continue as Q1 earnings unfold?

Let’s delve into the earnings picture of some of the largest companies in the material space that would drive the performance of these funds in the coming week. These include Dow Chemical (DOW – Free Report) , DuPont (DD – Free Report) , Praxair (PX – Free Report) , Air Products & Chemicals (APD – Free Report) and LyondellBasell Industries (LYB – Free Report) that dominate these fund’s portfolio. These stocks collectively account for the maximum portion, with 38.8% share in XLB, 38.6% in IYM, 28.0% in FMAT and 25.3% in VAW.

According to the our surprise prediction methodology, stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP are likely to beat earnings estimates, while a Zacks Rank #4 or #5 (Sell rated) are best avoided.

Inside Our Surprise Prediction of These Stocks

Dow Chemical has a Zacks Rank #3 and an Earnings ESP of -4.04%, indicating a less chance of beating estimates this quarter. The stock saw positive earnings estimate revision of six cents over the past 90 days for the to-be-reported quarter and delivered positive earnings surprise of 11.31% on average over the last four quarters. Though the stock has a solid Value Style Score of B, its Growth and Momentum Style Score of C and F, respectively, are unimpressive. Dow Chemical is scheduled to report its earnings on April 27 before the opening bell.

DuPont is expected to report its results on April 25 before market open. It has a Zacks Rank #2 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. The stock saw no earnings estimate revision for the to-be-reported quarter over the past 60 days. However, it delivered positive earnings surprises in the last four quarters, with an average beat of 29.9%. The stock has an unfavorable Value and Momentum Style Score of C each, while a Growth Style Score of A looks solid.