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Energy ETFs Gain on Exxon and Chevron Q3 Beat

Thanks to higher oil prices, a raft of earnings reports from U.S. oil giants suggest a strong rebound in the energy sector after more than three years of struggling.

In particular, two U.S. supermajor oil producers, Exxon Mobil XOM and Chevron CVX, came up with solid third-quarter results beating our estimates on both the top and bottom lines. The improving trend is likely to continue with oil prices trading above the $50 mark (read: 4 ETFs to Capitalize on the Oil Rally).

Earnings in Focus

The largest U.S. oil company, Exxon Mobil, reported earnings per share of 93 cents, trumping the Zacks Consensus Estimate of 89 cents and improving from the year-ago earnings of 63 cents. Revenues rose 12.8% year over year to $66.16 billion and edged past our $63.51 billion estimate. The stock was up 0.3% following the earnings announcement.

Earnings per share of $1.03 at Chevron, which trails Exxon Mobil, also outpaced the Zacks Consensus Estimate by four cents and increased from the year-ago earnings of 68 cents.  Revenues climbed 20.1% year over year to $36.2 billion and were well above our estimate of $33.671 billion. Despite the strong results, shares of CVX are down 4.1% since its earnings release.

While these stocks belong to a solid Zacks Industry Rank in the top 32%, Exxon looks like a more compelling choice given its Zacks Rank #2 (Buy) versus a Zacks Rank #3 (Hold) for Chevron (read: Q3 Earnings to Drive Energy ETFs Higher).    

ETFs in Focus

Given the earnings announcement, ETFs having the largest allocation to these energy behemoths are in focus. These funds have a Zacks ETF Rank #4 (Sell) or #5 (Strong Sell) with a High risk outlook.

iShares U.S. Energy ETF IYE

This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to the broad energy space. It holds 67 stocks in its basket with AUM of $1.1 billion and average daily volume of 461,000 shares. The product charges 44 bps in fees per year from investors. Exxon Mobil and Chevron occupy the top two positions in the basket taking the bigger chunk of assets at 24.8% and 15%, respectively. From a sector perspective, integrated oil & gas makes up for 43.2% share while oil exploration & production, and oil equipment & services round off the next two spots with a double-digit exposure each. The ETF is up 0.5% on the day.

Energy Select Sector SPDR XLE

This is the largest and most popular ETF in the energy space with AUM of $16.4 billion and average daily volume of around 14.2 million shares per day. Expense ratio comes in at 0.14%. The fund follows the Energy Select Sector Index and holds 32 securities in its basket. XOM and CVX occupy the top two spots with 24% and 17.5% share, respectively. In terms of industrial exposure, oil, gas & consumable fuels accounts for nearly 86.5% of the portfolio while energy equipment & services takes the remainder. XLE added 0.2% on the day (read: Energy ETFs Head to Head: XLE vs. VDE).

Fidelity MSCI Energy Index ETF FENY

The fund follows the MSCI USA IMI Energy Index, holding 128 stocks in its basket. Out of these, XOM and CVX take the top two spots at 24% and 14.6%, respectively. In terms of industrial exposure, oil, gas & consumable fuels accounts for nearly 85.1% of the portfolio while energy equipment & services takes the remainder. The product charges 8 bps in annual fees and trades in good volume of about 171,000 shares. It has accumulated $433.2 million in its asset base and added 0.4%.

Vanguard Energy ETF VDE

This fund manages about $3.8 billion in asset base and provides exposure to a basket of 134 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees good volume of about 286,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the top firms with 21.8% and 15% allocation, respectively. Though the product is skewed toward the integrated oil & gas sector with 40.1% of assets, oil exploration and production, and oil equipment services also provide a nice mix in the portfolio with a double-digit exposure each. VDE is up 0.5% following XOM and CVX results (see: all the energy ETFs here).

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SPDR-EGY SELS (XLE): ETF Research Reports
 
ISHARS-US EGY (IYE): ETF Research Reports
 
FID-ENERGY (FENY): ETF Research Reports
 
VIPERS-ENERGY (VDE): ETF Research Reports
 
Chevron Corporation (CVX): Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
 
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