Market participants always love clarity and visibility. With the third quarter in the books, investors likely want more visibility regarding upcoming earnings reports.
As of Sept. 28, 116 S&P 500 member firms — an all-time high — issued some form of third-quarter earnings per share (EPS), with 74 of those forecasts being on the negative side of the ledger. While negative guidance is bad news on a stock-specific level, the clarity offered in those updates plays a vital role in efficient markets.
When it comes to exchange traded funds that are homes to an array of companies that provided investors with third-quarter earnings visibility, the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), both of which follow the Nasdaq-100 Index (NDX), are ideas to consider. Investors consider those ETFs and others may be concerned about the aforementioned 64% of S&P 500 companies issuing negative third-quarter guidance, but as FactSet noted, that’s in line with the 10-year average.
Earnings Clarity for QQQ, QQQM
In the conversation regarding third-quarter earnings clarity, QQQ and QQQM are relevant for another reason. The Invesco ETFs allocate 48.41% of their weights to the technology sector — the group that’s delivered the highest amount of third-quarter guidance.
“At the sector level, Information Technology is the main driver of the increase in the overall number of S&P 500 companies issuing quarterly EPS guidance in recent quarters,” observed FactSet’s John Butters. “For Q3 2023, 45 companies in the Information Technology sector have issued quarterly EPS guidance, which is above the 5-year average of 38 and above the 10-year average of 35. If 45 is the final number for the quarter, it will tie the mark with Q2 2022 (45) for the highest number of companies in the Information Technology sector issuing EPS guidance for a quarter since FactSet began tracking this data in 2006. However, at least 40 companies in this sector have been issuing quarterly EPS guidance since Q1 2022.”
To date, the 45 tech companies that issued third-quarter guidance included 23 on the negative side and 22 on the bullish side.
While third-quarter previews have been scant from communications services – the second-largest sector weight in QQQ and QQQM — 11 consumer cyclical companies have provided updates to investors. Six were negative and five were upbeat. That’s pertinent to investors mulling the Invesco funds because the ETFs devote 14% of their lineups to consumer cyclical names.
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