We are in the middle of the earnings season, and the materials sector is seemingly tempering the overall Q1 growth picture after energy and industrials. This is especially true as total earnings from 52.3% of the sector’s total market capitalization reported so far are down 20.7% on a 13.3% revenue decline. Though the revenue beat ratio of 44.4% looks dull, earnings surprises were impressive with a beat ratio of 77.8%. In particular, Dow Chemical (DOW) and DuPont (DD) came up with both earnings and revenue surprises. Additionally, DuPont provided an upbeat earnings guidance for this year. Further, the sector is performing remarkably well, having gained an average 0.9% (average price difference between a day before and after the earnings announcement of a stock), per the Zacks Earnings Trend. DOW Earnings in Focus The largest U.S. chemical maker continued its streak of earnings beat for the tenth quarter. Earnings per share came in at 89 cents, trumping the Zacks Consensus Estimate of 83 cents and improving from 84 cents earned a year ago. Revenues dropped 13% year over year to $10.7 billion but surpassed our estimate of $10.48 billion. Healthy earnings were credited to cost-cutting efforts that led to decade-high margins. EBITDA margin expanded 164 bps to 21.1%, representing the highest quarterly margin in more than a decade. The company remained committed to cost reduction and efficiency programs that are likely to boost margins and shareholder returns in the coming quarters. Additionally, its pending all-stock merger with DuPont is on track to close in the second half of this year. Upon combination, the new company will be named DowDuPont and would be split into three publicly traded companies, namely material sciences, specialty products and agrochemicals, through tax-free spin-offs. The combination is expected to deliver cost synergies of $3 billion within the first two years of completion (read: Materials ETFs Surge on Dow Chemical, DuPont Chemistry). Following the solid results on April 28, shares of Dow Chemical initially rose 0.5% but closed at down 0.3% on negative sentiment over the stock market at large. DD Earnings in Focus The world's second-largest seed maker reported earnings per share of $1.26, which strongly beat the Zacks Consensus Estimate by 24 cents but remained the same as the year-ago quarter. Total revenue slipped 6% year over year to $7.4 billion and edged past our $7.2 billion estimate. The company is in the midst of global cost savings plan ahead of its merger with Dow Chemical. It is on track to save $730 million in annual costs by the end of 2016. This is expected to add 64 cents to earnings per share this year. With the cost-cutting initiative plan and lower negative currency translation expectation, the chemicals and seed producer raised the 2016 earnings per share guidance to $3.05–$3.20 from $2.95–$3.10. The midpoint is well above the current Zacks Consensus Estimate of $3.06. DuPont now expects currency headwinds to dilute full-year earnings by 20 cents per share, down from 30 cents projected earlier. Following the earnings announcement on April 25 before the market opened, DD shares have climbed nearly 0.7% to date. ETFs in Focus Given the upbeat results from these two chemical titans, material ETFs that are heavily invested in them are in focus. These funds have an unfavorable Zacks ETF Rank of 5 or ‘Strong Sell’ rating, suggesting their underperformance in the coming days. We have detailed them below (read: More Pain Ahead for Basic Materials ETFs in 2016?): Materials Select Sector SPDR (XLB) The most popular material ETF that follows the Materials Select Sector Index. This fund manages about $2.6 billion in its asset base and trades in heavy volume of around 7.3 million. The ETF charges 14 bps in fees per year from investors. In total, the fund holds about 29 securities in its basket with DOW and DD taking the top two spots, with nearly 11% allocation each. In terms of industrial exposure, chemicals dominates the portfolio with 71.1% share while metals & mining and containers & packaging round off the top three positions. iShares U.S. Basic Materials ETF (IYM) This ETF tracks the Dow Jones U.S. Basic Materials Index and holds 52 stocks in its basket. The fund has AUM of $553.4 million and charges 45 bps in fees and expenses. Volume is good as it exchanges around 147,000 shares in hand a day. DOW and DD occupy the top two positions in the basket, with nearly 11% of assets each. The product is heavily skewed toward the chemical segment, as it makes up for more than two-thirds of the portfolio while industrial gases, steel, and metals & mining receive minor allocation each (see: all the Materials ETFs here). Vanguard Materials ETF (VAW) This fund has amassed about $1.3 billion in its asset base and offers exposure to 118 stocks by tracking the MSCI US Investable Market Materials 25/50 Index. The ETF has 0.10% in expense ratio while volume is moderate at 78,000 shares. Here, DOW and DD are the top two firms accounting for nearly 8% share each. Chemicals makes up for nearly three-fifths of the portfolio while container & packaging and steel also make a nice mix in the portfolio. Fidelity MSCI Materials Index ETF (FMAT) This fund provides exposure to 121 materials stocks with AUM of $80.8 million. This is done by tracking the MSCI USA IMI Materials Index. Here too, DD and DOW are the top two firms with nearly 8% allocation each. Chemicals accounts for 67.5% share while container & packaging, and metals & mining round off the top three spots with a double-digit exposure each. The ETF has 0.12% in expense ratio while volume is moderate at 65,000 shares a day. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report DOW CHEMICAL (DOW): Free Stock Analysis Report DU PONT (EI) DE (DD): Free Stock Analysis Report SPDR-MATLS SELS (XLB): ETF Research Reports ISHARS-US BA MA (IYM): ETF Research Reports VIPERS-MATERIAL (VAW): ETF Research Reports FID-MATRLS (FMAT): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report