Exxon, Chevron Disappoint: Energy ETFs Fall

Energy seems to be the second weakest sector at the start of the Q1 reporting cycle. This is especially true as total Q1 earnings from 10% of the sector’s total market cap in the S&P 500 Index is down 13% from the same period last year on 0.3% higher revenues. Earnings beat ratio is zero while revenue beat ratio is 66.7% at this stage.

In particular, two U.S. supermajor oil producers — Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) — came up with disappointing results despite higher oil prices. Exxon Mobile missed on both earnings and revenues while Chevron lagged revenue estimates. Both companies have been hit by weak margins and refining weaknesses (read: ETFs to Buy/Avoid on Higher Oil Prices).

Earnings in Focus

The largest U.S. oil producer, Exxon Mobil, reported earnings per share of 55 cents, missing the Zacks Consensus Estimate of 75 cents but improving from the year-ago earnings of $1.09. Revenues dropped 6.7% year over year to $63.6 billion and fell short of the estimated figure of $67.93 billion. Exxon registered the first loss in its refining business since 2009, citing the worst refining margins on gasoline and other profits it had seen in a decade.

Chevron topped earnings per share by 13 cents. Earnings per share of $1.39 were lower than the year-ago earnings of $1.90. Revenues slid 6.8% year over year to $35.2 billion and lagged the estimated $37.9 billion. Chevron’s refining and chemical profits fell 65%.

Both stocks were down following strong quarterly results with XOM losing 1.2% and CVX shedding 0.7%. Both Exxon and Chevron have a Zacks Rank #3 (Hold) and a VGM Score of A. The duo belongs to a bottom-ranked Zacks industry (bottom 33%).

ETFs in Focus

Given this, investors might want to tap energy ETFs having the largest allocation to these energy behemoths. Below we have highlighted some of them in detail. These ETFs have lost more than 1% following the results of two major oil firms.

Energy Select Sector SPDR XLE

This is the largest and most-popular ETF in the energy space with AUM of $14 billion and average daily volume of around 16.6 million shares per day. Expense ratio comes in at 0.13%. The fund follows the Energy Select Sector Index and holds 29 securities in its basket. XOM and CVX occupy the top two spots with 22.6% and 18.2% share, respectively. XLE has a Zacks ETF Rank #3 with a High risk outlook (read: Brexit Delayed: ETFs & Stocks to Gain).

iShares U.S. Energy ETF (NYSE:XLE) IYE

This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to the U.S. companies that produce and distribute oil and gas. It holds 67 stocks in its basket with AUM of $801 million and average daily volume of about 750,000 shares. The product charges 43 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 24.4% and 15.7%, respectively. The product has a Zacks ETF Rank #3 with a High risk outlook.

Vanguard Energy ETF VDE

This fund manages about $3.7 billion in asset base and provides exposure to a basket of 138 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees a good volume of about 435,000 shares and charges 10 bps in annual fees. Here again, Exxon and Chevron are the top firms with 23.2% and 15.9% allocation, respectively. VDE carries a Zacks ETF Rank #3 with a High risk outlook (see: all the Energy ETFs here).

Fidelity MSCI Energy Index ETF FENY

The fund follows the MSCI USA IMI (LON:IMI) Energy Index, holding 129 stocks in its basket. Out of these, XOM and CVX take the top two spots at 23.3% and 15.1%, respectively. The product charges 8 bps in annual fees and trades in a good volume of around 321,000 shares. It has accumulated $547.3 million in its asset base and has a Zacks ETF Rank #3 with a High risk outlook.

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

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

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

Vanguard Energy ETF (VDE): ETF Research Reports

Chevron Corporation (CVX): Free Stock Analysis Report

Exxon Mobil Corporation (XOM): Free Stock Analysis Report

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Zacks Investment Research