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Industrial ETFs in Focus on Mixed GE Q1 Performance

On Friday, General Electric (GE), the industrial conglomerate giant, reported first-quarter 2016 earnings in line with expectations. Revenues however missed estimates. Earnings per share came in at 21 cents, in line with the Zacks Consensus Estimate and up 5% from the year-ago quarter.
 
Revenues rose 6% year over year to $27.8 billion but were well below our estimated $29 billion. The revenue miss were due to a weak global economy and an oil price slide that hurt revenues in the renewable and oil and gas segments (read: How to Profit from the Failed Doha Meeting via ETFs).
 
For 2016, the company reaffirmed its earnings per share guidance of $1.45–$1.55. The Zacks Consensus Estimate of $1.50 per share is within the guided range. Organic revenue is expected to grow 2–4% while cash generation is estimated at $29–$32 billion. General Electric also intends to return $26 billion to its shareholders this year, including $8 billion in dividends and $18 billion in share repurchases.
 
Market Impact
 
Following mixed Q1 results, shares of GE slipped 0.7% in Friday’s trading session and the industrial ETFs having double-digit allocation to this industrial conglomerate giant are in focus for the days ahead (see: all the Industrials ETFs here).
 
Fidelity MSCI Industrials Index ETF (FIDU)
 
This fund tracks the MSCI USA IMI Industrials Index, holding 342 stocks in its basket. General Electric takes the top spot at 12.7% share with the aerospace and defense industry making up for almost one-fourth of the portfolio, followed by industrial conglomerates at 20.9%. The product has amassed $161.7 million in its asset base while it trades in moderate volume of nearly 117,000 shares a day on average. It is one of the low cost choices in the space charging 12 bps in annual fees from investors. The fund gained 0.5% following GE results and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook.
 
Industrial Select Sector SPDR (XLI)
 
This is the largest and most popular ETF in the space with AUM of $7.2 billion and average daily volume of 13.2 million shares. It follows the Industrial Select Sector Index and charges 14 bps in fees per year. Holding a small basket of 67 securities, GE takes the top spot with 11.3% allocation. Form a sector look, aerospace and defense occupies the top position at 25.8% followed by industrial conglomerates (21.1%) and machinery (14.1%). The fund added 0.3% on the day. The fund has a Zacks ETF Rank of 4 or ‘Sell’ rating with a Medium risk outlook.
 
Vanguard Industrials ETF (VIS)
 
This fund follows the MSCI US IMI Industrials 25/50 index and holds about 342 securities in its basket. Of these firms, GE occupies the top position with 12.7% allocation. Here again, aerospace and defense takes the top spot at 21.7% followed by industrial conglomerates at 20.6%. The fund manages $2.1 billion in its asset base and charges 10 bps in annual fees. Volume is moderate as it exchanges 113,000 shares a day on average. The product gained 0.4% on the day. The fund has a Zacks ETF Rank of 3 with a Medium risk outlook (read: ETFs & Stocks Set to Surge on Solid Industrial Data).
 
iShares U.S. Industrials ETF (IYJ)
 
This product provides exposure to 214 industrial stocks by tracking the Dow Jones U.S. Industrials Index. It is heavily concentrated on GE – the top firm – with 11% of assets while others make up for less than 4% share. Further, the ETF is tilted toward capital goods companies at 58.9% while software & services and transportation round off the next two spots with double-digit exposure. The fund has an AUM of $744.9 million and average daily volume of 73,000 shares. Expense ratio came in at 0.44%. The product gained nearly 0.5% following GE results and has a Zacks ETF Rank of 3 with a Medium risk outlook.
 
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GENL ELECTRIC (GE): Free Stock Analysis Report
 
FID-INDUSTL (FIDU): ETF Research Reports
 
SPDR-INDU SELS (XLI): ETF Research Reports
 
VIPERS-INDUS (VIS): ETF Research Reports
 
ISHARS-US INDU (IYJ): ETF Research Reports
 
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