From Sweta Killa: After the closing bell on Wednesday, tech prime Cisco Systems CSCO reported robust fiscal 2019 first-quarter results. The networking giant topped estimates on both revenues and earnings and provided an upbeat outlook.
Results in Detail
Earnings of 68 cents per share outpaced the Zacks Consensus Estimate by a couple of cents and improved from the year-ago earnings of 55 cents. Revenues rose 8% year over year to a record $13.1 billion and edged past the estimated $12.87 billion. Robust results were driven by strong product sales across the board and all geographies. Notably, the networking-gear company reported its fourth-consecutive quarter of growth following eight quarters of declines.
The networking leader’s transition from its traditional business of high-end switches and routers to high-growth areas such as security, the Internet of Things and cloud computing is clearly paying off. As a result, Cisco now expects revenue growth of 5-7% and earnings per share in the range of 71-73 cents in second-quarter fiscal 2019. The mid-point of both the ranges is above the Zacks Consensus Estimate of 4.82% for revenue growth and earnings of 71 cents per share (see: all the Technology ETFs here).
If the networking giant could maintain its projected revenue growth throughout fiscal 2019, then it could top $50 billion in revenues for the first time in its history.
Buoyed by solid results and an encouraging guidance, Cisco shares rallied as much as 5% in after-hours trading on heavy volumes. The stock currently has a Zacks Rank #3 (Hold) and a VGM Score of B. Additionally, it belongs to a top-ranked industry (top 45%).
ETFs to Watch
ETFs having the largest allocation to this network giant will be in focus over the coming days. Investors should closely monitor the movement in these funds and grab the opportunity when it arises.
iShares U.S. Telecommunications ETF IYZ
This fund follows the Dow Jones U.S. Select Telecommunications Index and offers exposure to 45 American companies that provide telephone and Internet products, services, and technologies. Cisco occupies the third position with 14.6% of the assets. The ETF has AUM of $501.9 million and trades in average daily volumes of 474,000 shares. It charges 43 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Telecom ETFs in Focus Post Q3 Results).
iShares North American Tech-Multimedia Networking ETF IGN
This ETF provides concentrated exposure to domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. Holding 23 securities in its basket, Cisco takes the second spot with an 8.8% allocation. The product has accumulated $53.1 million in its asset base, while seeing a lower volume of around 17,000 shares a day. Expense ratio comes in at 0.47%. The fund carries a Zacks ETF Rank #2 with a High risk outlook.
First Trust NASDAQ Technology Dividend Index Fund TDIV
This fund provides exposure to dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $874.4 million in its asset base and trades in moderate volume of about 79,000 shares per day. The ETF charges 50 bps in annual fees and holds about 97 securities in its basket. Of these firms, CSCO occupies the second position, making up roughly 8.4% of the assets (read: 4 ETFs to Tap IBM-Red Hat Potential Growth Deal).
First Trust Nasdaq Cybersecurity ETF CIBR
This ETF follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cyber security segment of the technology and industrials sectors. It has accumulated $733.9 million in its asset base. The fund charges 60 bps in annual fees and trades in average daily volume of about 198,000 shares. In total, the product holds 38 stocks in its basket, with Cisco taking the second spot at 6.5% (read: Cyber Security ETFs to Shine on Robust Earnings).
Invesco Dynamic Networking ETF PXQ
This fund follows the Dynamic Networking Intellidex Index, holding 29 securities in its basket. Out of these, Cisco is the third firm, accounting for 5.5% share. The fund is relatively unpopular and illiquid in the broad technology space, with AUM of $69.4 million and average daily volume of about 5,000 shares. It charges 63 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
The First Trust ETF VI NASDAQ Technology Dividend Index Fund (TDIV) was trading at $35.39 per share on Thursday afternoon, up $0.38 (+1.09%). Year-to-date, TDIV has gained 1.13%, versus a 1.65% rise in the benchmark S&P 500 index during the same period.
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