“The shale oil & gas revolution is contributing to a manufacturing renaissance that has resulted in steadily rising margins and thus faster EPS growth. However, revenue growth will be hard to come by this year due to the strong USD, and the soft economy is evident in the recent negative revisions. However, the sector’s P/E multiple has held steady over the last year or so even as the market’s P/E has risen, boosting Industrials’ attractiveness to about average,” said AltaVista Research in a recent note.
XLI’s estimated 2015 price-to-earnings ratio of 16.2 is below the 17.6 P/E for the S&P 500, according to AltaVista data. By that metric, only XLU and the Financial Select Sector SPDR (NYSEArca: XLF) trade at deeper discounts to the S&P 500 of the nine SPDRs.
AltaVista has a neutral rating on XLI, a rating that implies the fund’s valuations adequately the fundamentals of the underlying components. The neutral rating also implies average appreciation potential.
Industrial Select Sector SPDR
