The third-quarter (Q3) earnings reporting cycle is in full swing. Investors have already shifted their focus from Fed and Russia and put emphasis on earnings releases. Bottom line may be investors’ top focus amid an earnings season, but top line probably tells you more about the inherent strength of a company.
Why to Follow Revenue Growth This Reporting Cycle?
For Q3, total earnings are expected to grow 2.0% from the same period last year on 10.7% higher revenues as per the Earnings Trends issued on Nov 2, 2022. Earnings growth will likely trail revenue growth in the coming quarters. For Q4 and Q1 of 2023, earnings growths are likely to be negative 2.5% and 1.3% over 5.4% and 4.5%, respectively.
For Q3, six out of the Zacks classified 16 sectors of the S&P 500 will likely witness a double-digit growth in revenues. Further, investors should note that sales are harder to be influenced in an income statement than earnings. A company can land up on decent earnings numbers by adopting cost-cutting or some other measures that do not speak for its core strength. But it is harder for a company to mold its revenue figure.
Below, we highlight five sectors and their related ETFs that could be used to book some profits on revenue growth potential.
Consumer Discretionary – Consumer Discretionary Select Sector SPDR Fund XLY
The sector is expected to expand 16.4% in Q3 followed by 22.8% expansion in Q2. The consumer sentiment too improved lately. The University of Michigan said its consumer sentiment index edged up to 59.8 in October from 58.6 in September. Economists had expected the index to inch up to 59.0.
Construction – Global X U.S. Infrastructure Development ETF PAVE
The sector is expected to record 17.5% revenue growth in Q3, following 17.3% expansion in the previous quarter. Biden’s infrastructure plan makes PAVE an intriguing pick.
Transportation – SPDR S&P Transportation ETF XTN
As the economic activities have been gaining steam, transportation sector has fallen into a sweet spot. The sector is expected to record 20.5% revenue growth in Q3, following 32.5% expansion in the previous quarter.
Industrials – Industrial Select Sector SPDR ETF XLI
Industrial activities have been in decent shape. Growing employment in manufacturing sector calls for that strength. The sector is expected to witness revenue growth of 12.9% in Q3 revenues, after 10.8% growth in Q2.
Autos – First Trust S-Network Future Vehicles & Technology ETF CARZ
The sector is expected to witness revenue growth of 32.3% in the ongoing reporting cycle, after 21.6% growth in Q2. Decent sales of Motor Vehicle & Parts and the price inflation of new cars have been palpable. Both factors indicate that the business conditions remained favorable for the auto industry.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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Industrial Select Sector SPDR ETF (XLI): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
First Trust SNetwork Future Vehicles & Technology ETF (CARZ): ETF Research Reports
SPDR S&P Transportation ETF (XTN): ETF Research Reports
Global X U.S. Infrastructure Development ETF (PAVE): ETF Research Reports
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Zacks Investment Research
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