Tag Archives: estimate

Insurance ETFs Shining Despite Dull Q3 Earnings

The Q3 earnings season hasn’t been all that encouraging for the financial sector as total earnings for 89.1% of the sector’s total market capitalization are up only 1.7% on 2.3% revenue decline. This is worse than Q2 and the four-quarter average earnings growth of 8.1% and 6.2%, respectively, on 0.8% and 1.3% revenue growth (read: Guide to the 7 Most Popular Financial ETFs ). Earnings surprises were also unimpressive with 53.7% of the companies beating earnings estimates and 42.7% of them beating on top lines. In particular, earnings from the insurance industry have been weaker with most players failing to beat or meet either our earnings or revenue estimates. MetLife (NYSE: MET ), Prudential Financial (NYSE: PRU ) and American International (NYSE: AIG ) missed our estimate on the earnings front while Chubb Corp (NYSE: CB ) an Aflac Inc. (NYSE: AFL ) lagged revenues. However, Travelers (NYSE: TRV ) and Allstate (NYSE: ALL ) surpassed our estimates on both the top and bottom lines. Insurance Earnings in Focus Earnings at one of the leading property and casualty insurer – Chubb – strongly outpaced our estimate by 20.30% and improved 9% from the year-ago quarter. However, revenues of $3.47 billion missed the Zacks Consensus Estimate of $3.51 billion. Another property and casualty insurer and an industry bellwether, Allstate , topped the Zacks Consensus Estimate by 20 cents with earnings of $1.52, which improved 9.3% from the year-ago quarter. Revenues rose 1% year over year to $9.03 billion and edged past the Zacks Consensus Estimate of $7.98 billion (see: all the Financial ETFs here ). Aflac , the seller of supplement health insurance, posted earnings per share of $1.56, beating our estimate by eight cents and improving 3.3% year over year. However, revenues declined 12.1% year over year to $5.00 billion and fell shy of our estimate of $5.11 billion. Earnings of $2.93 at personal property and casualty insurer, Travelers trumped the Zacks Consensus Estimate by 72 cents and improved 12.3% from the year-ago earnings. Revenues slid 1.3% year over year to $6.67 billion but surpassed our estimate of $6.63 billion. However, MetLife , the U.S. life insurer behemoth, reported disappointing earnings of 62 cents per share, lagging the Zacks Consensus Estimate of $1.47 and declining 62% from the year-ago earnings. However, revenues rose 0.3% year over year to $17.97 billion and were well ahead of our estimate of $17.47 billion. On the other hand, PRU , the second-largest U.S. life insurer, also missed our earnings estimate by three cents improved 9.1% year over year. Revenues declined 5.6% year over year to $11.1 billion but were on par with our estimate. The largest commercial insurer in the U.S. and Canada, AIG dampened investor’s mood with a huge earnings miss of 49.5% and year-over year decline of 56%. However, revenues of $13.16 billion came above our estimate of $13.06 billion. ETFs in Focus Despite unsatisfactory earnings, insurance ETFs have moved up from a one-month look buoyed up by speculations of an interest rate hike. This is because the sector is a clear beneficiary of a rising interest rate environment. Investors looking to gain exposure to this corner of the market segment in a diversified way may consider the following ETFs. SPDR S&P Insurance ETF (NYSEARCA: KIE ) This fund follows the S&P Insurance Select Industry Index and offers an equal weight exposure to 51 stocks, suggesting no concentration risk. None of the securities holds more than 2.28% of total assets. More than one-third of the portfolio is allocated to the property and casualty insurance sector while life & health insurance accounts for another one-fourth share. The ETF has managed $625 million in its asset base and trades in a moderate average daily volume of over 107,000 shares. The product has an expense ratio of 0.35% and gained nearly 4.6 over the past one month. It has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. iShares U.S. Insurance ETF (NYSEARCA: IAK ) With AUM of $130.9 million, this product tracks the Dow Jones U.S. Select Insurance Index and charges 43 bps in annual fees. Volume is light, trading in roughly 29,000 shares per day. In total, the fund holds 63 securities in its basket with the largest allocation going to American International at 13.6%, closely followed by Metlife at 9.5%. Other firms hold less than 6.5% of assets. For an industry look, property & casualty insurance accounts for 42.2% share while life & health insurance and multiline insurance round off the top three with double-digit exposure each. IAK is up 6.5% from a one-month look and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook. PowerShares KBW Insurance Portfolio ETF (NYSEARCA: KBWI ) This fund tracks the KBW Nasdaq Insurance Index and holds 23 securities in its basket. Each firm holds less than 9% share each with TRV, PRU and MET occupying the top three spots. While insurance makes up for 95% of the portfolio, consumer finance and banks take the remainder. The product has amassed about $14.4 million in AUM while volume is paltry at about 1,400 shares. The ETF charges an annual fee of 35 bps and added 6.5% in the trailing one-month period. It has a Zacks ETF Rank of 3 with a High risk outlook. Link to the original post on Zacks.com

Transport ETFs Modestly Up On Q3 Earnings

Unlike the second quarter, the transportation sector is headed for a solid Q3 earnings season, lagging only auto. This is especially true as total earnings from 97.8% of the sector’s total market capitalization reported are up 22.5% while revenues declined 1.2%. This is much better than Q2 earnings growth of 9.4% and revenue decline of 1.9% for the same period. Further, earnings surprises were predominantly solid with 84.6% of the companies beating earnings estimates and 30.8% beating on revenues compared with earnings and revenue beat ratios of 58.3% and 8.3%, respectively for Q2. For a better understanding, let’s dig into earnings results of some well-known industry players: Transportation Earnings in Focus The world’s largest package delivery company – United Parcel Service (NYSE: UPS ) – beat our earnings estimate by a couple of cents but revenues of $14.2 billion fell shy of our estimate of $14.35 billion. The company now expects earnings per share on the high end of the previous guidance of $5.05-$5.30 for fiscal 2015, which represents 6-12% growth on an annual basis. The Zacks Consensus Estimate at the time of earnings release was pegged at $5.27. Union Pacific (NYSE: UNP ) , the U.S. largest railroad, reported earnings of $1.50 per share outpacing the Zacks Consensus Estimate by seven cents but revenues of $5.56 billion fell short of our estimate of $5.65 billion. Other major railroads like CSX Corp. (NYSE: CSX ) and Kansas City Southern (NYSE: KSU ) also missed on revenues. At CSX, revenues lagged the Zacks Consensus Estimate by $68 million while at KSU revenues missed by $8 million. However, CSX outpaced our earnings estimate by couple of cents while KSU missed our earnings estimate by a penny. Ryder Systems (NYSE: R ) , the leader in supply chain management and fleet management services, topped the bottom line but lagged the top line. Earnings per share of $1.74 came above the Zacks Consensus Estimate of $1.72 while revenues of $1.67 billion were below our estimate of $1.72 billion. The two largest U.S. airlines – Delta Air Lines (NYSE: DAL ) and United Continental (NYSE: UAL ) – beat our earnings estimates by three cents and four cents, respectively. Revenues for Delta were slightly below the Zacks Consensus Estimate but above for United Continental (read: Highflier Airlines Earnings: Time for JETS ETF ). Last but not the least, earnings for the leading trucking carrier – J.B. Hunt (NASDAQ: JBHT ) – also came in above the Zacks Consensus Estimate by three cents and revenues were $30 million below our estimate. ETFs in Focus Despite the slew of earnings beat, many stocks have seen rough performances. As a result, the transport ETFs has been modestly up over the past 15 days. Both the iShares Dow Jones Transportation Average Fund (NYSEARCA: IYT ) and the SPDR S&P Transportation ETF (NYSEARCA: XTN ) are up 0.4% and 0.2%, respectively. Both funds have a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (see: all the Industrials ETFs here ). IYT The fund tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of 21 securities. The fund has a certain tilt toward large cap stocks at 49% while mid and small caps account for 31% and 20% share, respectively, in the basket. The product is heavily concentrated on the top firm – FedEx (NYSE: FDX ) – at 11.9%, followed by UPS (8%), UNP (6.8%) and KSU (6.3%). From a sector perspective, air freight & logistics takes the top spot with more than one-fourth of the portfolio while trucking, airlines and railroads round off to the next three spots with double-digit exposure each. The fund has accumulated nearly $965 million in AUM while sees solid trading volume of more than 409,000 shares a day. It charges 43 bps in annual fees. XTN This fund uses an almost equal weight methodology for each security by tracking the S&P Transportation Select Industry Index. Holding 49 stocks in its basket with AUM of $270 million, each security accounts for less than 3.4% of total assets. The ETF is skewed toward small caps at 55% while the rest is evenly split between mid and large caps. About one-third of the portfolio is dominated by trucking, while airlines takes another one-fourth share. Airfreight & logistics, and railroads also make up for a double-digit allocation each. The fund charges 35 bps in fees per year from investors and trades in a moderate volume of nearly 96,000 shares a day. Link to the original post on Zacks.com

ETFs To Watch On Mixed Mortgage REIT Q1 Earnings

The mortgage REIT sector started this year in the red as markets witnessed extreme volatility following concerns regarding global growth worries, weak first-quarter earnings results and a stronger dollar. Meanwhile, the continuous surge in yields weighed on the performance of the mortgage REITs. Moreover, investors were apprehending an interest rate hike right from the start of 2015. Additionally, a gradual decline in the unemployment rate increased the possibility of the hike, as it is speculated that the Fed will opt for raising the short-term rate in the later half of this year. A rising interest rate environment raises concerns about the performance of borrowed money which in turn would impact the dividend yield. These factors had an adverse effect on the first-quarter earnings results of the mortgage REITs. Mortgage REITs Earnings in Focus Among the major companies in this sector, American Capital Agency Corp. (NASDAQ: AGNC ) reported first-quarter 2015 net spread and dollar roll income of 70 cents per share (excluding estimated “catch-up” premium amortization), beating the Zacks Consensus Estimate by a cent. However, it was significantly below the previous quarter’s figure of 92 cents. Moreover, net interest income of $297 million came marginally below the Zacks Consensus Estimate of $298 million. Meanwhile the company reduced its monthly dividend rate to 20 cents from 22 cents paid earlier due to the prevailing volatile environment and a challenging interest rate scenario. Moreover, the company witnessed a decline in annualized economic return on common equity from 13.4% in the prior quarter to 7.1% in the first quarter. Another key player, Annaly Capital Management, Inc. (NYSE: NLY ) also posted mixed first-quarter results. The company reported first-quarter 2015 core earnings of 25 cents per share, missing the Zacks Consensus Estimate by 5 cents. However, net interest income of $389.8 million comfortably beat the Zacks Consensus Estimate of $347 million, but declined 26.6% year over year. Net interest margin for this quarter was 1.26% compared with 1.32% a year ago. Also, the company reported that net interest rate spread of 0.83% for the quarter decreased 7 basis points (bps) from the year-ago figure. Separately, the company said that its capital ratio (representing the ratio of stockholders’ equity to total assets) at the end of first-quarter 2015 was 14.1%, down 110 bps year over year. ETFs to Watch After releasing mixed first-quarter results on Apr. 27, shares of American Capital Agency declined nearly 4.4%. On the other hand, Annaly Capital Management’s shares rose a meager 0.5% following its earnings release on May 6. Given the lackluster first quarter, REIT ETFs with significant exposure to these mortgage REITs might be affected by the share price movements of these companies. Below we have highlighted two mREIT ETFs that are likely to remain in focus in the upcoming days. iShares Mortgage Real Estate Capped (NYSEARCA: REM ) REM tracks the FTSE NAREIT All Mortgage Capped Index, measuring the performance of the residential and commercial mREIT market in the U.S. The fund consists of 37 securities in its basket while it charges investors 48 basis points a year in fees. The product has a solid yield of nearly 12.9%. NLY and AGNC are the top two holdings of the fund occupying 14.30% and 10.99% share, respectively. This suggests a huge concentration of fund assets among the top 10 holdings, with nearly two-thirds of assets going to the top 10 securities alone. REM declined 1.8% this year and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Market Vectors Mortgage REIT Income ETF (NYSEARCA: MORT ) The ETF tracks the Market Vectors Global Mortgage REITs Index, measuring the performance of companies primarily engaged in the purchase or service of commercial or residential mortgage loans. The fund is relatively less popular with an asset base of $118.1 million and has a lower dividend yield of 7.8% as compared to REM. Like REM, the above-mentioned REITs occupy the top two spots here too, having a combined exposure of roughly 30%. MORT declined 1.3% in year-to-date frame and charges 41 basis points as expenses. Original post