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How Are Industrial ETFs Reacting to Mixed Q3 Earnings?

The industrial sector has been attracting investor attention as the gradual reopening of U.S. and global economies highlights brighter prospects. Consumer confidence in the United States rose in October primarily on the heels of easing Delta variant concerns, improving labor market conditions, rebounding U.S. economy from the pandemic-led slump and accelerated coronavirus vaccine rollouts.

The latest data on U.S. industrial output appears to be encouraging as recoveries from the damages caused by Hurricane Ida are apparent. Per the Fed’s recently-released data, total industrial production increased 1.6% in October after declining about 1.3% in September. There was a 1.2% rise in manufacturing output (hitting its highest level since March 2019). Going on, there was a 1.2% uptick in utility production and a 4.1% upside in mining production.

Against this backdrop, we take a look at ETFs exposed to the sector and the impact of some big industrial earnings releases on them:

Industrial ETFs in Focus

In the current scenario, we believe it is prudent to discuss ETFs that have relatively high exposure to the industrial companies discussed below:

The Industrial Select Sector SPDR Fund XLI

The Industrial Select Sector SPDR Fund seeks to provide investment results that, before expenses, match the performance of the Industrial Select Sector Index.

The Industrial Select Sector SPDR Fund comprises 73 holdings, with the below-mentioned companies taking about 16.5% of the fund. XLI has AUM of $18.01 billion and its expense ratio is 0.12%. The Industrial Select Sector SPDR Fund has gained about 1.5% since Oct 21 (as of Nov 22) (read: Gift These 5 Top-Ranked ETFs This Holiday Season).

Vanguard Industrials ETF VIS                   

Vanguard Industrials ETF offers exposure to the industrial sector and follows the MSCI US Investable Market Industrials 25/50 Index.

Vanguard Industrials ETF holds about 352 securities in its basket, with the concerned companies having around 12.5% weight in the fund. VIS is up around 2.3% since Oct 21 (as of Nov 22). Vanguard Industrials ETF’s AUM is $5.28 billion and expense ratio is 0.10% (read: Will ETFs Gain on US Industrial Output Rise in October?).

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.

The Fidelity MSCI Industrials Index ETF has risen about 2.6% since Oct 21 (as of Nov 22). It comprises 345 holdings and puts about 12.7% weight in the companies discussed below. The Fidelity MSCI Industrials Index ETF’s AUM is $882.2 million and expense ratio, 0.08%.

iShares U.S. Industrials ETF IYJ

The iShares U.S. Industrials ETF seeks to track the investment results of the Russell 1000 Industrials 40 Act 15/22.5 Daily Capped Index.

iShares U.S. Industrials ETF holds about 183 securities in its basket and puts about 8.9% weight in the companies in focus. The fund has lost almost 2.1% since Oct 21 (as of Nov 22). iShares U.S. Industrials ETF’s AUM is $1.66 billion and expense ratio is 0.41% (read: PayPal Plunges on Weak Guidance: ETFs in Focus).

Inside Q3 Earnings

On Oct 26, General Electric Company’s GE third-quarter 2021 adjusted earnings were 57 cents per share, beating the Zacks Consensus Estimate of 41 cents. Moreover, the bottom line compared favorably with the prior-year quarter’s earnings of 38 cents per share. Consolidated revenues totaled $18.43 billion, reflecting a year-over-year decline of 0.5%. Disappointing sales performance by the Healthcare and Renewable Energy segments impacted the revenue figure, partially offset by gains in Aviation. Also, the company’s top line missed the Zacks Consensus Estimate of $19.13 billion.

On Oct 26, 3M Company’s MMM third-quarter 2021 earnings and sales outpaced the consensus estimate by 12.4% and 3.2%, respectively. The company’s adjusted earnings in the reported quarter were $2.45 per share. On a year-over-year basis, the bottom line rose 0.8%. In the reported quarter, 3M’s net sales totaled $8.94 billion, reflecting an increase of 7.1% from the year-ago quarter.

On Oct 22, Honeywell International Inc. HON reported mixed results for third-quarter 2021, wherein earnings beat while revenues missed estimates. Adjusted earnings were $2.02 per share, beating the Zacks Consensus Estimate of $2.01. However, the bottom line increased 29.5% year over year. Revenues came in at $8.47 billion, missing the consensus estimate of $8.71 billion. Notably, the top line surged 9% year over year on a reported basis and 8% on an organic basis. Notably, the upside was driven by strength in warehouse and workflow solutions, productivity solutions and services, and gas analysis businesses along with strong demand for building products as well as process solutions services and thermal solutions. It was also supported by a recovery in commercial aftermarket demand and solid growth in business and general aviation original equipment demand.

On Oct 21, Union Pacific Corporation’s UNP third-quarter 2021 earnings of $2.57 per share beat the Zacks Consensus Estimate of $2.48. The bottom line rose 27.9% on a year-over-year basis. Operating revenues came in at $5.57 billion, which surpassed the Zacks Consensus Estimate of $5.38 billion. The figure rose 13.2% year over year, primarily due to an increase in freight revenues.


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General Electric Company (GE): Free Stock Analysis Report
 
Honeywell International Inc. (HON): Free Stock Analysis Report
 
Union Pacific Corporation (UNP): Free Stock Analysis Report
 
3M Company (MMM): Free Stock Analysis Report
 
Vanguard Industrials ETF (VIS): ETF Research Reports
 
Industrial Select Sector SPDR ETF (XLI): ETF Research Reports
 
iShares U.S. Industrials ETF (IYJ): ETF Research Reports
 
Fidelity MSCI Industrials Index ETF (FIDU): ETF Research Reports
 
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