Exxon, Chevron Earnings Intensify Woes For Energy ETFs

Energy appears to be the weakest sector this reporting cycle. Total fourth-quarter earnings for the sector are expected to be down 47.1% from the same period last year on 3% lower revenues.

Earnings from two U.S. supermajor oil producers, namely Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) aggravated concerns of the energy sector, which has been struggling from demand slowdown due to the coronavirus outbreak (read: Virus Scare Weighs on Oil ETFs: Go Short for the Near Term).

Although Exxon Mobil missed on both earnings and revenues, Chevron topped on the bottom line.

Earnings in Focus

The largest U.S. oil producer Exxon Mobil reported earnings per share of 41 cents, lagging the Zacks Consensus Estimate of 44 cents and also declining from the year-ago earnings of $1.51. Revenues dropped 6.6% year over year to $67.17 billion and also fell shy of the estimated figure of $69.1 billion. Shares of XOM dipped 4.1% to hit the lowest level since September 2010 (read: What’s in Store for Energy ETF This Earnings Season?).

Chevron beat on earnings per share by a penny. Earnings of $1.49 were lower than the year-ago figure of $2.06. Revenues fell 14.2% year over year to $36.35 billion and also fell short of the consensus mark of $39.85 billion. The stock slipped 3.8% after earnings announcement.

ETFs in Focus

Given this scenario, energy ETFs with the largest allocation to energy behemoths are in focus. Below we highlighted a few in detail, which carry a Zacks ETF Rank #5 (Strong Sell), suggesting more pains ahead.

Energy Select Sector SPDR XLE

This is the largest and the most-popular ETF in the energy space with AUM of $15.3 billion and average daily volume of 15.3 million shares per day. Expense ratio is 0.13%. The fund follows the Energy Select Sector Index and holds 28 securities in its basket. XOM and CVX occupy the top two spots with 22.4% and 20.4% share, respectively (read: Can Energy ETFs Rebound as China Promises Ramped-up Purchases?).

iShares U.S. Energy ETF IYE

This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to U.S. companies that produce and distribute oil and gas. It holds 49 stocks in its basket with AUM of $510.1 million and average daily volume of about 518,000 shares. The product charges 42 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 23.6% and 18.2%, respectively.

Vanguard Energy ETF VDE

This fund manages $2.9 billion in asset base and provides exposure to a basket of 136 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees a good volume of about 410,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the two leading firms with 21.8% and 17.5% allocation each (see: all the Energy ETFs here).

Fidelity MSCI Energy Index ETF FENY

The fund follows the MSCI USA IMI (LON:IMI) Energy Index, holding 113 stocks in its basket. Of these, XOM and CVX take the top two spots at 22.7% and 17.6%, respectively. The product charges 8 bps in annual fees and trades in a good volume of around 259,000 shares. It has accumulated $391.9 million in its asset base.

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iShares U.S. Energy ETF (IYE): ETF Research Reports

Vanguard Energy ETF (VDE): ETF Research Reports

Fidelity MSCI Energy Index ETF (FENY): ETF Research Reports

Energy Select Sector SPDR ETF (NYSE:XLE): ETF Research Reports

Exxon Mobil Corporation (XOM): Free Stock Analysis Report

Chevron Corporation (CVX): Free Stock Analysis Report

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Zacks Investment Research