4 ETFs Set To Surge In Q4 Earnings

The fourth-quarter earnings season is expected to be strong, with earnings growth likely to pick up and continue accelerating after dipping in the preceding quarter. The S&P 500 index is anticipated to see earnings growth of 9.2% and revenue growth of 7%. The market is also at record levels, scaling series of highs at the start of the year.

The forecast compares favorably with Q3 earnings growth of 6.7% on 5.9% revenue growth. The revision trend has been favorable with earnings estimates holding up better relative to other comparable periods. The earnings estimates for Q4 have moved up 2 percentage points from 8.6% at the start of the quarter. Additionally, 13 of the 16 Zacks sectors are likely to be contributors to earnings growth, suggesting potential upside in many corners of the market.

Given the strong sentiments, investors should focus on ETFs with large allocations to stocks that have a high chance of surprising in their upcoming release. This could result in a winning bet this earnings season.

How to Find the Right ETFs?

Handpicking ETFs with a portfolio of stocks that are most likely to beat on earnings is no mean feat. However, our proprietary methodology of finding the Earnings ESP of stocks by calculating the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate is a solid building block.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Betting on ETFs with the winning combination of stocks that have a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) would lead to profits for investors. This is especially true as an earnings beat will definitely draw investors’ attention and propel the stock price and related ETFs.

First, we ran our Zacks stock screener to find stocks with a positive Earnings ESP and a favorable Zacks Rank. Then, we narrowed down the list by selecting the group of stocks with higher positive Earnings ESP. Accordingly, we chose three ETFs, which comprise few stocks with higher chances of beating estimates in a particular industry.