Energy’s earnings drag is evaporating as S&P 500 energy earnings are expected to be only slightly negative for the fourth quarter and offer significant upside potential moving forward in 2017. XLE currently resides near its lowest levels since prior to the U.S. presidential election in November. Exxon and Chevron combine for over 38% of XLE’s weight.
Additionally, the energy sector is usually among one of the largest sector weights in value ETFs, underscoring the point that the group is attractively valued relative to some defensive sectors, which trade at lofty multiples.
“Exxon, the world’s biggest oil producer by market value, earned 95 cents a share during the first quarter, outperforming all but one of the 19 analysts’ estimates in a Bloomberg survey. Chevron, the second-largest U.S. driller, swung to a profit in a big way, scoring its largest quarterly gain since 2014 and a per-share result that was 64 percent higher than the average estimate,” according to Bloomberg.
Last Friday, Chevron reported a first-quarter profit after reporting an annual loss last year. Exxon also revealed a dividend increase last week. The company has one of the longest dividend increase streaks among major energy firms.
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