Oracle Q3 Earnings Beat Put Tech ETFs In Focus
Tech bellwether Oracle (NYSE: ORCL ) reported third-quarter fiscal 2015 results (ending in February) after the closing bell on Tuesday. The company beat our earnings estimates for the first time in the past four quarters, while revenues lagged due to negative currency translations. Earnings per share came in at 65 cents, topping the Zacks Consensus Estimate by a penny. Revenues were flat year-over-year at $9.3 billion and below our $9.45 billion estimate. While the company’s shift to the Web-based cloud computing business is paying off, a strong dollar restricted the top line during the reported quarter. Excluding the impact of unfavorable currency rates, revenues would have risen 6%. Cloud software platform sales climbed 29% from the year-ago quarter, and accounted for 4% of total revenue. Oracle will continue to benefit from the new generation of cloud computing and Big Data, and will steal market share from Salesforce.com Inc. (NYSE: CRM ), the only major software company competing in the cloud segment. Notably, the company is on track to sell more than $1 billion of new cloud subscriptions in the full fiscal 2015 (read: 3 ETFs Leading the Technology Sector Surge ). For the fiscal fourth quarter, the world’s largest database software maker expects revenues to grow in the range of 1-6% in constant currency terms and earnings per share to range between 90 to 96 cents. The midpoint is well above the Zacks Consensus Estimate of 90 cents. Oracle also pointed out in its conference call that high volatility in foreign exchange rates could hurt revenues in the future quarters. The company also raised its quarterly dividend by 25% to 15 cents per share. Based on dividend hike and cloud optimism, Oracle shares rose almost 4% in after-hours trading. The stock currently has a Zacks Rank #3 (Hold), and has a poor Zacks Industry Rank in the bottom 43% at the time of writing, suggesting mixed trading in the coming days. ETFs in Focus Given this, ETFs with the highest allocation to this software giant will be in focus in the days ahead. Investors should closely monitor the movement in these funds and avoid these if the stock drags them down (see: all the Technology ETFs here ): iShares North American Technology-Software ETF (NYSEARCA: IGV ) This ETF provides exposure to the software segment of the broader U.S. technology space by tracking the S&P North American Technology-Software Index. The fund holds a basket of 57 securities, with Oracle taking the third spot at 8.44% of total assets. It is quite popular, with AUM of over $1.2 billion, while the volume is moderate, as it exchanges nearly 92,000 shares a day. The product charges 47 bps in fees and expenses, and has gained about 4% so far this year. IGV has a Zacks ETF Rank of 3, or a “Hold” rating with a High risk outlook. First Trust NASDAQ Technology Dividend Index ETF (NASDAQ: TDIV ) This fund provides exposure to the dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $766 million in its asset base, and trades in volume of around 233,000 shares per day. The ETF charges 50 bps in annual fees (read: 5 Dividend ETFs to Buy for Income in 2015 ). In total, the fund holds about 95 securities in its basket. Of these firms, ORCL takes the sixth position, making up roughly 4.24% of the assets. In terms of industrial exposure, the ETF allocates one-fifth portion in semiconductors and semiconductor equipment, followed by technology hardware, storage & peripherals (16.9%) and software (15.2%). It has lost 1.8% so far this year. iShares U.S. Technology ETF (NYSEARCA: IYW ) This ETF tracks the Dow Jones US Technology Index, giving investors exposure to the broad technology space. The fund holds 140 stocks in its basket, with AUM of $3 billion, while charging 45 bps in fees and expenses. Volume is moderate, as it exchanges nearly 686,000 shares in hand a day (read: Bet on These Top Ranked Tech ETFs for Outperformance ). Oracle takes the ninth spot in the basket, with 3.94% of assets. The product is heavily skewed toward the software and services segments, as these make up just less than half of the portfolio. Tech hardware and equipment, as well as semiconductors and semiconductor equipment take the remaining portion in the basket. The fund has added nearly 1.7% in the year-to-date time frame, and has a Zacks ETF Rank of 1, or a “Strong Buy” rating with a Medium risk outlook.