Zacks Earnings Consistent ETF's Average Process Pillar and People Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy gets an Average Process Pillar. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy's industry-standard management team still needs to prove it has a competitive advantage and earns an Average People Pillar rating. The strategy's parent organization still has a way to go to reach the industry standard, evidenced by portfolio managers with modest tenures and a below-average success ratio across its lineup. As a result, the firm obtains a Below Average Parent Pillar rating, recently downgraded from Average.

Analyst Rating

Microsoft

Apple

Alphabet

Procter & Gamble

UnitedHealth Group

Synopsys

Eli Lilly

JPMorgan Chase & Co

Caterpillar

American Express

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Zacks Earnings Consistent Portfolio ETF earns an Average Process Pillar rating. 

The leading factor in the rating is the experience of the management team, which averages 30 years at this fund. A reasonable level of diversification across individual securities also supports the process. The fund's top 10 holdings account for 38% of assets. Lastly, the process is limited by the parent firm's five-year retention rate of 75%, which suggests it could do more to retain its portfolio managers.

 This strategy tends to hold smaller, deeper value companies than its average peer in the Large Blend Morningstar Category. Looking at additional factor exposure, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also tilted toward low-volatility stocks in recent years, meaning those that have a lower standard deviation of returns. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. In this month, the strategy also had more exposure to the Yield factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in healthcare and consumer defensive relative to the category average by 6.9 and 4.1 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and energy, underweight the average by 4.7 and 3.1 percentage points of assets, respectively. The portfolio is composed of 56 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 38.0% of the portfolio's assets were concentrated in the top 10 fund holdings, compared to the category average's 49.5%. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.

Average

Process

Zacks Earnings Consistent Portfolio ETF earns an Average People Pillar rating. The main contributor to the rating is the stability of the management team. Specifically, the fund has not seen a manager change in the last three years. Management team experience, which averages 30 years at this fund, also supports the rating. Lastly, the rating is limited by the parent firm's five-year success ratio of 0%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup.

People

Zacks has a ways to go to become an industry-standard steward, resulting in a Below Average Parent Pillar rating. With an average asset-weighted tenure of eight years among the longest-tenured managers at Zacks, the firm is on par with peers. Seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions. Zacks fails to showcase longevity across its product shelf, as evidenced by its five-year success ratio. Over this time period, only 0% of its roster has been able to both survive and beat its respective category median. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. Zacks has had high portfolio management turnover over the past five years compared with peers, detracting from its rating, as long-term stability tends to go together with positive results.

Below Average

Parent

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