Outperforming energy stocks and corresponding exchange traded funds will be put to the test this week amid an earnings avalanche for the sixth-largest sector weight in the S&P 500.
The Energy Select Sector SPDR (NYSEArca: XLE), the leading asset gatherer among ETFs this year, and rival equity-based energy ETFs will see their recent gains tested as significant portions of their weights step into the earnings confessional this week. XLE is up 7% over the past month and on a year-to-date basis trails only the Utilities Select Sector SPDR (NYSEArca: XLU) among the nine sector SPDRs. [Energy ETFs Dominate Sector Flows]
On Thursday May 1, Exxon Mobil (NYSE: XOM), the largest U.S. oil company, and ConocoPhillips (NYSE: COP), the largest independent U.S. oil and natural gas producer, deliver first-quarter results. Chevron (NYSE: CVX), the second-largest U.S. oil company, follows on Friday.
Those three stocks combine for about 32% of XLE and over 38% of the iShares U.S. Energy ETF (NYSEArca: IYE). IYE has also impressed in terms asset-gathering proficiency, hauling more than $500 million of its $2.3 billion in assets just this year. [Old Energy ETF Looks Strong]
Although energy ETFs have recently been in rally mode, accounting for a significant percentage of the ETFs hitting new all-time highs on a daily basis, one of the reasons investors favored these funds to start with is still at play: Compelling valuations. [Value ETFs Still Have Upside]
“With a price-to-earnings ratio of 14.2, significantly below the S&P 500’s 17.8, energy should continue to attract investors as the rotation to value continues,” reports Rodrigo Campos for Reuters.
To get a sense for how ETFs such as XLE and IYE will perform post-earnings announcements, investors can evaluate the Market Vectors Oil Service ETF (NYSEArca: OIH) and the iShares U.S. Oil Equipment & Services ETF (NYSEArca: IEZ). Those ETFs are up an average of 2% since April 17, the day Schlumberger (NYSE: SLB), the world’s largest oil services company, delivered first-quarter results.
Next week is also a significant week for energy sector earnings as Occidental Petroleum (NYSE: OXY), EOG Resources (NYSE: EOG) and Anadarko Petroleum (NYSE: APC) all deliver results on May 5. Those stocks combine for almost 10.5% of XLE’s weight, according to State Street data.
Energy Select Sector SPDR
ETF Trends editorial team contribute to this post.