The prolonged weakness in oil prices has been hurting the profitability of the energy sector over the past one year and the Q4 earnings picture is not different in any way. Yet again, the energy sector has been the biggest drag to the fourth-quarter earnings season (read: If the Oil Crash Continues, Buy These 5 ETFs to Outperform ).
This is especially true as the biggest U.S. energy producers - Exxon Mobil ( XOM ) and Chevron ( CVX ) - posted their worst quarterly profits in many years. While both surpassed our revenue estimates, CVX missed on the bottom line.
Earnings in Focus
The largest U.S. oil company, Exxon Mobil , logged in the smallest quarterly profit in more than a decade. It reported earnings per share of 67 cents, trumping the Zacks Consensus Estimate of 64 cents but declining from the year-ago earnings of $1.56. Total revenue plunged 31.5% year over year to $59.8 billion but was ahead of our $50.6 billion estimate. Despite the earnings and revenue beat, shares of XOM fell as much as 3.6% but managed to recoup some of the losses at the close.
Chevron , which trails Exxon Mobil, also unexpectedly posted its first quarterly loss in more than 13 years due to plunging oil prices that have hurt profitability across all segments. Loss per share came in at 31 cents, while the Zacks Consensus Estimate and the year-ago figure were earnings of 48 cents and $1.85, respectively. Revenues also dropped 36.5% year over year to $29.2 billion but were well above the Zacks Consensus Estimate of $27.5 billion. The stock fell as much as 3.5% on January 29 following the earnings announcement, but erased all its losses to close at up 0.6%. However, the stock is down 5.4% over the past three days post its earnings release (see: all the energy ETFs here ).
ETFs in Focus
The lackluster results and a slide in share prices of these big oil giants have further dragged down energy ETFs, which are already struggling with the collapse in oil prices. Below, we have highlighted some funds with the largest allocation to these energy behemoths that will be in focus for the coming days. These products were down over 3% in yesterday's trading session.
iShares U.S. Energy ETF ( IYE )
This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to the broad energy space. It holds 81 stocks in its basket with AUM of $982.4 million and average daily volume of more than 1.2 million shares. The product charges 44 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 24.1% and 13.4%, respectively. From a sector perspective, integrated oil & gas makes up for 41.8% share while oil exploration & production, and oil equipment & services round off the next two spots with double-digit exposure each. The fund has a Zacks ETF Rank of 5 or 'Strong Sell' rating with a High risk outlook (read: Energy ETF (IYE) Hits New 52-Week Low ).
Fidelity MSCI Energy Index ETF ( FENY )
The fund follows the MSCI USA IMI Energy Index, holding 137 stocks in its basket. Out of these, XOM and CVX take the top two spots at 23.1% and 13%, respectively. In terms of industrial exposure, oil, gas & consumable fuels accounts for nearly 82% of the portfolio while energy equipment & services take the remainder. The product charges 12 bps in annual fees and trades in good volume of about 189,000 shares. It has accumulated $287.1 million in its asset base and has a Zacks ETF Rank of 4 or 'Sell' rating with a High risk outlook.
Vanguard Energy ETF ( VDE )
This fund manages nearly $3.6 billion in asset base and provides exposure to a basket of 146 energy stocks by tracking the MSCI US Investable Market Energy 25/50 Index. The product sees solid volume of about 679,000 shares and charges 10 bps in annual fees. Exxon and Chevron are the top firms with 24.4% and 13% allocation, respectively. Though the product is skewed toward the integrated oil & gas sector with 41.3% of assets, oil exploration and production, and oil equipment services provide a nice mix in the portfolio with double-digit exposure each. VDE has a Zacks ETF Rank of 5 with a High risk outlook.
Energy Select Sector SPDR ( XLE )
This is the largest and most popular ETF in the energy space with AUM of $11.3 billion and average daily volume of around 22.3 million shares per day. Expense ratio comes in at 0.14%. The fund follows the Energy Select Sector Index and holds 42 securities in its basket. Here again, XOM and CVX occupy the top two spots with 18.9% and 14.5% share, respectively. In terms of industrial exposure, oil, gas & consumable fuels accounts for nearly 81.4% of the portfolio while energy equipment & services takes the remainder. The fund has a Zacks ETF Rank of 4 with a High risk outlook.
Leveraged ETFs to Make Quick Profits
Investors seeking to tap the current bearish sentiments for quick returns in a very short period could go short on either of the three leveraged products - ProShares Short Oil & Gas ETF ( DDG ) , ProShares UltraShort Oil & Gas ETF ( DUG ) and Direxion Daily Energy Bear 3x Shares ETF ( ERY ) - available in the space. The trio gained 3.8%, 6.5% and 9.9%, respectively, on the day and charges 95 bps in fees per year (read: Oil Hits 12-Year Low: Short Energy Stocks with ETFs ).
DDG provides unleveraged inverse (or opposite) exposure to the daily performance of the Dow Jones U.S. Oil & Gas Index while DUG seeks two times (2x or 200%) leveraged inverse exposure to the same index. Meanwhile, ERY creates a triple (3x or 300%) leveraged short position in the S Energy Select Sector Index.
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CHEVRON CORP (CVX): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
ISHARS-US EGY (IYE): ETF Research Reports
FID-ENERGY (FENY): ETF Research Reports
VIPERS-ENERGY (VDE): ETF Research Reports
SPDR-EGY SELS (XLE): ETF Research Reports
PRO-ULS OIL&GAS (DUG): ETF Research Reports
PRO-SH OIL&GAS (DDG): ETF Research Reports
DIR-EGY BEAR 3X (ERY): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
