US stocks had an incredible run last year, as investors focused mainly on the massive support by the Fed, largely ignoring lackluster earnings. But as economic growth has started showing clear signs of gaining momentum, the Fed has decided to gradually withdraw its support from the market.
As investors prepare for the post-QE world, corporate earnings will be back in focus. The fourth quarter earnings season has now “unofficially” started, with Alcoa reporting last Thursday.
Per Zacks Earnings Trends, earnings for S&P 500 companies are expected to increase 6.3% from the same period last year, the strongest quarterly growth of 2013. Finance sector accounts for a big part of the Q4 growth with total earnings for the sector expected to be up +20.1%, thanks mainly to easy comparisons.
Total earnings growth expected outside of Finance, is just +3.5%. At the same time, some sectors/industries are expected to report better earnings than others. Now may be a great time to consider investing in some of the sectors/industries ETFs that are expected to report excellent earnings growth in the coming weeks.
Below we have analyzed three sectors/industries that look poised to benefit from the earnings season and Zacks top ranked ETFs to play them.
Transportation–-iShares Dow Jones Transportation Average Fund (NYSEARCA:IYT)
Transportation sector is expected to report earnings growth of 17.5% during Q4, after 13.2% growth in Q3. Growth rate is expected to be in double digits for 2014 and 2015 as well.
With AUM of $756 million, IYT is the most popular ETF in the Transportation sector.
The asset base is invested in 21 holdings, with Union Pacific, FedEx and Kansas City Southern being the top three holdings. (Read: 3 Hot Sector ETFs for 2014)
In terms of industries, the product has highest exposure to railroad industry—accounting for almost 30% of the asset base. Delivery services, Airlines and Trucking and airlines also get double-digit allocations.
Railroad stocks had a strong performance in 2013 and have started the new year on a sound note. According to the American Association of Railroads, overall U.S. railroad traffic was up 3.2% in the first week of 2014, compared with the same period in 2013.