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Buy These ETFs & Stocks as Q3 Earnings Unfold

Sanghamitra Saha
Asbury Automotive (ABG) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

Be it chances of a Fed hike, announcement of balance sheet unwinding or the deadly aftershocks of hurricanes, Wall Street has digested it all. The markets are now probably focusing on only one thing, and that is the third-quarter earnings season.

The S&P 500 is likely to report 3.3% earnings growth in Q3 on 5% revenue growth, as per the latest Earnings Trends. From sectorial point of view, the energy sector looks as the strongest, but on the back of easy comparisons.

Against this backdrop, we highlight a few sector ETFs and stocks that enjoy the tailwinds of earnings growth and solid fundamentals.

Industrial Products

The sector is forecast to record 8.3% earnings growth on 2.6% revenue growth. Manufacturing activity came in the strongest in six years in August, as per a survey (read: 6 Sector ETFs Must Buys Now).

First Trust Industrials/Producer Durables AlphaDEX Fund FXR

The 93-stock fund puts about 21.68% weight in machineries followed by 15.67% in Aerospace & Defense and 12.03% in Airlines. No stock accounts for more than 2% of the basket. It charges 66 bps in fees. The fund has a Zacks Rank #2 (Buy).

Alcoa Corp. AA

The company is one of the global industry leaders in bauxite, alumina and aluminum products.

The Zacks Rank #1 (Strong Buy) stock has a VGM (Value, Growth, Momentum) Score of A. The Zacks Industry Rank and Sector Rank are in the top 4% and top 13%.

Construction

The sector is expected to log 10.8% earnings growth on 11.4% revenue growth.

Hurricanes Irma and Harvey gave the sector a reason for increased activity. While Hurricane Harvey flooded Texas, Irma demolished Florida, though less than expected. So, the need for reconstruction and remodeling will surely boost construction ETFs (read: Irma Aftermath Puts These ETF Areas in Focus).

PowerShares Dynamic Building & Construction Portfolio PKB

The 30-stock fund does not put more than 5.15% of the weight in a single stock. The fund charges 63 bps in fees. It has a Zacks Rank #2.

M/I Homes Inc. MHO

M/I Homes is one of the nation's leading builders of single-family homes.

The Zacks Rank #2 stock has a VGM Score of A. The Zacks Industry Rank is in the top 17%.

Technology

The sector is likely to record 8.8% earnings growth on 6.5% revenue growth.

The technology sector has been strongly positioned thanks to improving economic and industry fundamentals and Trump’s proposed corporate tax reform.

SPDR Technology Select Sector SPDR Fund XLK

The 75-stock fund invests about 20.43% weight in software, followed by 18.54% in Internet Software & Services and 17.07% in Technology Hardware Storage & Peripherals. Apple takes about 14.97% of the fund while Microsoft and Facebook occupy about 10.6% and 7.4% of the fund, respectively. The fund charges 14 bps in fees and carries a Zacks Rank #2 (read: ETF Investing Lessons from Warren Buffett).

SK Telecom Co. Ltd. SKM

SK Telecom is in the cellular service.

The Zacks Rank #1 stock has a VGM Score of A. The Zacks Industry Rank and Sector Rank are in the top 9% and top 38%, respectively.

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M/I Homes, Inc. (MHO) : Free Stock Analysis Report
 
SPDR-TECH SELS (XLK): ETF Research Reports
 
PWRSH-DYN BLDG (PKB): ETF Research Reports
 
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ALCOA CORP (AA) : Free Stock Analysis Report
 
SK Telecom Co., Ltd. (SKM) : Free Stock Analysis Report
 
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