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General Electric ETFs in Focus Ahead of Q2 Earnings

Sweta Jaiswal, FRM

General Electric Company GE is set to release second-quarter 2019 results on Jul 31, 2019, before the market opens. This American multinational conglomerate has gained nearly 2.1% in the past three months.

Inside Our Methodology

General Electric has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of 0.00%. Our quantitative surprise prediction methodology clearly shows that the combination of a Zacks Rank of 1, 2 (Buy) or 3 (Hold) along with a positive Earnings ESP increases the odds of an earnings beat for a stock. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for General Electric’s earnings is pegged at a decline of 36.8% from the year-ago reported figure while the same for revenues stands at a 4.1% dip. The company’s financial performance in the last four quarters was mixed, having recorded better-than-expected results twice and lagging estimates in the other two quarters, the average positive surprise being 5.56%.  The stock belongs to a top-ranked Zacks Industry (top 9%).

What to Watch out for

General Electric has been grappling with a disappointing performance from its Power business over the last few quarters. In fact, sluggishness in the segment is likely to persist as is reflected in General Electric’s expectation for 2019.  For the full year, the company expects Power’s organic revenues to decrease in a high-single digit. Moreover, some analysts are expecting the company to announce layoffs within the Power division along with other initiatives to cut additional costs.

At the same time, General Electric is well aware of the internal and external challenges that it currently faces including surging demand for renewable energy sources, geopolitical tensions, challenges with project execution and overcapacity in the industry. Also, some sluggishness in the GE Capital arm in comparison to the previous quarter is expected to be noticed in the to-be-reported quarter.

However, General Electric is likely to gain from strength in other businesses. In this regard, Aviation business is in a good position to benefit from the rising popularity of LEAP engines. Furthermore, healthy performances of Renewable Energy and Healthcare segments might drive the company’s top line. Additionally, the to-be-reported quarter’s results might show growth from focusing on commercial expansion in the emerging markets, efforts to lower leverage and the launch of digital business. 

ETFs in Focus

Let’s take a look at some ETFs with a considerable exposure to General Electric before the upcoming earnings release (see all Industrial ETFs here):

Industrial Select Sector SPDR Fund XLI

The fund seeks to provide investment results that (before expenses) match the performance of the Industrial Select Sector Index. It comprises 68 holdings with General Electric occupying the sixth highest spot with 3.94% weight. Its AUM is $10.55 billion and the expense ratio, 0.13%. The fund carries a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Top Sectors of 1H & Their Top Stocks).

Fidelity MSCI Industrials Index ETF FIDU

The Fidelity MSCI Industrials Index ETF seeks to provide investment returns that match — before fees and expenses — the performance of the MSCI USA IMI Industrials Index. It comprises 341 holdings with General Electric occupying the seventh highest spot with 3.08% weight. Its AUM is $460.3 million and the expense ratio, 0.08%. The fund carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Vanguard Industrial ETF VIS

This fund offers exposure to the industrial sector and follows the MSCI US IMI Industrials 25/50 Index. It holds about 357 securities in its basket with General Electric occupying the seventh highest spot with 2.99% weight. Its AUM is $3.67 billion and the expense ratio, 0.10%. The fund carries a Zacks ETF Rank of 1 with a Medium risk outlook (read: U.S. Stocks Near Record High: Top-Ranked ETFs to Buy).

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General Electric Company (GE) : Free Stock Analysis Report
 
Industrial Select Sector SPDR Fund (XLI): ETF Research Reports
 
Vanguard Industrials ETF (VIS): ETF Research Reports
 
Fidelity MSCI Industrials Index ETF (FIDU): ETF Research Reports
 
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