3 Sector ETFs To Watch On Revenue Growth Potential

The ETF industry saw tremendous volatility in the April-June quarter of 2015 thanks to speculations over Fed tightening, global growth worries, horrendous equity sell-off in China, upheaval in the energy space and the nagging Greek debt deal saga. Though the Greek prime minister Tsipras finally managed to sign a bailout deal after month-long negotiations, his submission to stringent austerities proposed by international lenders brought unrest in the country.

It is in such a backdrop that the Q2 earnings season has commenced this year. Overall, the second-quarter earnings season seems a resemblance of the last quarter as Q1 issues are very well present in Q2 with a combination of a strong greenback and a weak energy sector. Expectations for both earnings and revenue growth remain negative for the quarter.

 
As per the Zacks Earning Trends issued on July 6, 2015, earnings for the S&P 500 are expected to be down 6.7% in Q2 while revenues are likely to decline 6.1%. However, despite this depreciating background, some sectors managed to outperform, snapping the downing trend and look to offer decent returns in the ongoing quarter, even if volatility persists.
 
While looking for these outstanding performers, we would like to emphasize on those sectors which are likely to post strong revenue gains. This is because, sales are harder to influence an income statement than earnings. A company can land up on decent earnings numbers by adopting cost-cutting or some other measures which do not speak for the companies’ core strength. But it is harder for a company to mold revenue figures by some measures.
 
Below, we highlight three lucrative sector ETFs that could be used to book some profits in this volatile market. Each sector poses positive and strong revenue growth estimates for Q2 and offers intriguing fundamentals to protect investors’ portfolios in a tottering global investing backdrop:
 
SPDR S&P Health Care Services ETF (XHS)
 
Medical or Health Care sector appears to be the best positioned with a 7% revenue growth estimate, the best in the universe of 16 S&P sectors categorized by Zacks. Rise in merger and acquisitions, Affordable Care Act, an aging global population and the sector’s non-cyclical nature amid a wave of uncertainty made the sector a true star (read: Obamacare is Here to Stay: 3 ETFs to Buy). 
 
As a result, Health Care Services ETFs like XHS should log greater gains. XHS is up 17.4% so far this year (as of July 13, 2015) and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
 
iShares U.S. Home Construction ETF (ITB)
 
Though the first quarter was downbeat for the housing sector, spring sprung good news for the companies. In any case, its key selling season started in March and will run through the back-to-school season in September. A plunge in yields is another positive for the space (read: 3 ETFs to Buy as Housing Picks Up).