Cisco Beats On Revenue, Guides Higher: Tech ETFs In Focus
One of the tech primes – Cisco Systems (NASDAQ: CSCO ) – reported third-quarter results after the closing bell on Wednesday. While the company met our earnings estimates, it beat revenue estimates for the sixth consecutive quarter, spreading some bullishness into the sector. This is especially true given that the company clearly emerged as a strong winner amid dollar strength and succeeded when its major rivals International Business Machines (NYSE: IBM ) and Oracle (NYSE: ORCL ) faltered on revenue growth by missing our estimates earlier this earnings season (read: IBM Revenues Fall Again in Q1: ETFs to Watch ). Further, Cisco guided higher for the ongoing quarter at its conference call. Nonetheless, the company’s shares fell about 0.7% at the close in aftermarket hours. Cisco’s Q2 Results in Focus Earnings per share came in line with the Zacks Consensus Estimate of 48 cents (accounting for stock-based compensation). Revenues rose 5% year over year to $12.14 billion and were well ahead of our estimate of $12.06 billion. The better-than-expected revenue performance was aided by solid demand for its high-end switches and routers. The world’s largest network equipment maker expects revenues to grow 1-2% year over year and earnings per share in the range of 55-57 cents for the ongoing quarter. Earnings guidance is above the Zacks Consensus Estimate of 51 cents. Cisco is the leading player in routers and switches business and the fastest-growing company in the $50 billion market for servers. Earlier in the month, the company announced Chuck Robbins as the new CEO, who will replace John Chambers on July 26. Market Impact Cisco’s revenue beat and solid guidance put tech ETFs having the largest allocation to the network giant in focus for the days ahead. Investors should closely monitor the movement in these funds and grab the opportunity when it arises (see: all the Technology ETFs here) . iShares North American Tech-Multimedia Networking ETF (NYSEARCA: IGN ) This ETF provides concentrated exposure to the domestic multimedia networking securities by tracking the S&P North American Technology Multimedia Networking Index. Holding 24 securities in its basket, Cisco takes the third spot with an 8.92% allocation. The product has a definite tilt toward mid caps, which comprise half of the portfolio. The fund has accumulated $148.1 million while it sees moderate volume of less than 50,000 shares a day. Expense ratio comes in at 0.47%. The fund has added 4.7% in the year-to-date time frame and has a Zacks ETF Rank of 1 or “Strong Buy” rating with a High risk outlook. First Trust NASDAQ Technology Dividend Index ETF (NASDAQ: TDIV ) This fund provides exposure to the dividend payers in the technology sector by tracking the NASDAQ Technology Dividend Index. The product has amassed about $712.4 million in its asset base and trades in good volume of more than 207,000 shares per day. The ETF charges 50 bps in annual fees. In total, the fund holds about 110 securities in its basket. Of these firms, CSCO occupies the third position, making up roughly 8.17% of the assets. In terms of industrial exposure, the fund allocates nearly one-fifth portion in semiconductor and semiconductor equipment, followed by software (16.5%), technology hardware, storage & peripherals (16.4%), and communications equipment (14.2%). The fund is up 1.4% so far this year (read: Chipmakers Q1 Earnings Fail to Fuel Semiconductor ETFs ). PowerShares Dynamic Networking Portfolio ETF (NYSEARCA: PXQ ) This fund follows the Dynamic Networking Intellidex Index, holding 30 securities in its basket. Out of these, Cisco is the fifth firm accounting for 4.94% share. From a sector look, communications equipment dominates the fund’s portfolio, holding less than half the assets, followed by 29% in software and programming. The fund is less popular and illiquid in the broad tech space with AUM of $27.6 million and average daily volume of about 3,000 shares. It charges 63 bps in annual fees and has returned 5.5% in the year-to-date time frame. PXQ has a Zacks ETF Rank of 3 or “Hold” rating with a High risk outlook. Original post