4 Small-Cap Sector ETFs With Strong Q4 Earnings Potential
Thanks to the historical trend of “January Effect,” small-cap securities have proven their outperformance in January. Easing inflation and hopes of the Fed’s slower rate hike path have been showing the fruition of that trend this year. SPDR S&P 600 Small Cap ETF SLY (up 7.0% this year) beat the SPDR S&P 500 ETF Trust SPY (up 4.2%), SPDR Dow Jones Industrial Average ETF Trust DIA (up 3.5%) and the Invesco QQQ Trust (QQQ) (up 5.5%).
Americans too have regained confidence in the U.S. economy, with consumer confidence bouncing back in December and reversing consecutive declines in October and November to reach its highest level since April, per the University of Michigan's Consumer Confidence Index.
Investors must be interested in knowing small-cap stocks are shaping in the ongoing earnings season. Per Zacks Earnings Trends issued on Jan 11, 2023, small-cap index S&P 600 are projected to record 13.5% drop in earnings over 0.7% gains in revenues. This is against the large-cap S&P 500 index’s likelihood of 7.6% fall in earnings over 4% increase in revenues.
Against this backdrop, below we highlight a few small-cap (S&P 600) sectors that are likely to post better earnings and revenue growth during the current earnings season than other sectors.
Sector ETFs in Focus
Basic Materials – Invesco S&P SmallCap Materials ETF PSCM
Per Zacks Earnings Trends issued on Jan 11, 2023, basic materials stocks in the S&P 600 are likely to log 49.5% earnings growth over 14% revenue growth for fourth-quarter 2022.
The 35-stock fund is heavy on Chemicals (52.75%), followed by Metals & Mining (35.04%). The fund charges 29 bps in fees. The fund’s top holdings include ATI Inc (8.41%), Livent Corp (7.83%) and Balchem Corp (7.68%).
Oils & Energy – Invesco S&P SmallCap Energy ETF PSCE
Oils and energy stocks in the S&P 600 are likely to record 302.4% earnings growth over 36.0% revenue growth for fourth-quarter 2022.
The 28-stock fund is heavy on Energy Equipment & Services (52.47%), followed by Oil, Gas & Consumable Fuels (47.49%). The fund charges 29 bps in fees. The fund’s top holdings include Helmerich & Payne (12.72%), SM Energy (9.69%) and Patterson-UTI Energy (8.99%). The fund has a Zacks Rank #2.
Finance – Invesco S&P SmallCap Financials ETF PSCF
Finance stocks in the S&P 600 are likely to record 7% earnings growth over almost flat revenue growth for fourth-quarter 2022.
The 160-stock fund is heavy on Banks (39.54%), followed by REITs (27.9%). The fund charges 29 bps in fees. No stock accounts for more than 2.76%. The fund has a Zacks Rank #2.
Consumer Staples – Invesco S&P SmallCap Consumer Staples ETF PSCC
Consumer staples stocks in the S&P 600 are likely to record 5% decline in earnings over 3.1% revenue growth for fourth-quarter 2022.
The 32-stock fund is heavy on Food Products (40%), followed by Personal Products (22.87%). The fund charges 29 bps in fees. Hostess Brands (6.47%), Simply Good Foods (6.41%) and elf Beauty (5.59%) hold the top three stocks of the fund.
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
SPDR S&P 500 ETF (SPY): ETF Research Reports
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
Invesco S&P SmallCap Energy ETF (PSCE): ETF Research Reports
Invesco S&P SmallCap Consumer Staples ETF (PSCC): ETF Research Reports
SPDR S&P 600 Small Cap ETF (SLY): ETF Research Reports
Invesco S&P SmallCap Financials ETF (PSCF): ETF Research Reports
Invesco S&P SmallCap Materials ETF (PSCM): ETF Research Reports
