Energy ETFs Tumble As Exxon, Chevron Report Weak Earnings (XLE)

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From Zacks: The energy sector is once again poised to be the biggest contributor of Q2 earnings growth with total earnings expected to be up 123.1% year over year on 22.7% higher revenues.

Added to the strength is the recent surge in oil price that makes the sector more impressive (read: Strong Q2 Earnings Expectations Power Energy ETFs).

However, two U.S. supermajor oil producers – Exxon Mobil (XOM – Free Report) and Chevron (CVX – Free Report) – disappointed investors by missing earnings estimates. This is because Exxon struggled to boost operations while Chevron’s profit was hurt by rise in expenses.

Earnings in Focus

The largest U.S. oil company, Exxon Mobil, reported earnings per share of 92 cents, falling short of the Zacks Consensus Estimate of $1.26 but improving from the year-ago earnings of 78 cents. Revenues climbed 16.9% year over year to $73.5 billion and edged past the estimated figure of $70.25 billion.

Chevron, which trails Exxon Mobil, lagged earnings per share by 28 cents. Earnings per share of $1.78 were much higher than 77 cents earned in the year-ago period. Revenues rose 22.5% year over year to $42.24 billion and outpaced the estimated $40.78 billion.

Investors should note that both stocks have a Zacks Rank #3 (Hold) and a VGM Score of A. The duo belongs to a top-ranked Zacks industry (top 31%).

ETFs in Focus

Following the results, energy ETFs having the largest allocation to these behemoths were down nearly 0.6% on the day and will be in focus in the days ahead. These funds also have a Zacks ETF Rank #3.

Energy Select Sector SPDR (XLE – Free Report)

This is the largest and most popular ETF in the energy space with AUM of $19.3 billion and average daily volume of around 15.6 million shares per day. Expense ratio comes in at 0.13%. The fund follows the Energy Select Sector Index and holds 31 securities in its basket. XOM and CVX occupy the top two spots with 22.9% and 16.2% share, respectively (read: 5 Sector ETFs Most Exposed to Trade Tensions).

iShares U.S. Energy ETF (IYE – Free Report)

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 about 587,000 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 21.1% and 14.7%, respectively.

Vanguard Energy ETF (VDE – Free Report)

This fund manages about $4.4 billion in asset base and provides exposure to a basket of 139 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees a good volume of about 284,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the top firms with 20.5% and 14.1% allocation, respectively (see: all the energy ETFs here).

Fidelity MSCI Energy Index ETF (FENY – Free Report)

The fund follows the MSCI USA IMI Energy Index, holding 134 stocks in its basket. Out of these, XOM and CVX take the top two spots at 20.2% and 14%, respectively. The product charges 8 bps in annual fees and trades in a good volume of around 317,000 shares. It has accumulated $646.7 million in its asset base.

The Energy Select Sector SPDR ETF (XLE) was unchanged in premarket trading Tuesday. Year-to-date, XLE has gained 7.68%, versus a 5.33% rise in the benchmark S&P 500 index during the same period.

XLE currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 38 ETFs in the Energy Equities ETFs category.

This article is brought to you courtesy of Zacks Research.