From Zacks: Last week, software giant Oracle (ORCL – Free Report) reported fiscal first-quarter 2018 results. While the company beat the Zacks Consensus Estimate for revenues and earnings, it disappointed investors with a bleak outlook.
Oracle Q1 Earnings in Focus
Earnings per share came in at 62 cents, a penny ahead of the Zacks Consensus Estimate and up 12% year over year. Revenues increased 7% year over year to $9.2 billion and were above our $9.02 billion estimate.
The company’s long process of shifting to the Web-based cloud computing business is now paying off more than offsetting the decline in legacy business. Cloud software platform sales climbed 51% from the year-ago quarter to $1.5 billion and accounted for 16% of total revenue. Notably, Oracle is selling more cloud software platforms than any other company in the world and has grown three times faster in a year, gaining an edge over the software ace Salesforce.com Inc. (CRM – Free Report) . This indicates super-fast growth in cloud computing business (see: all the Technology ETFs here).
For the fiscal second quarter, the world’s largest database software maker expects total revenues to grow 2-4% on a constant currency basis, lower than the Zacks Consensus Estimate growth of 4.73%. This is because cloud sales are expected to increase 39%-43%, lower than the growth of 51% in the recently reported quarter, suggesting a slowdown to the soaring cloud business. Further, the company expects earnings per share of 64-68 cents, lower than the Zacks Consensus Estimate of 69 cents, reflecting some concerns in the company’s future growth.
The disappointing guidance pushed down shares of Oracle as much as 5% in the aftermarket trade. Currently, the stock has a Zacks Rank #2 (Buy) and a solid Industry Rank in the top 41%. However, the Value and Growth Style Score is unimpressive at C and F, respectively.
ETFs in Focus
Given this, ETFs with the highest allocation to this software giant look to be big movers this week and in the next. Investors should closely monitor the movement in these funds and grab any opportunity from a surge in the price of ORCL:
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 top spot at 9.3% of total assets. It is popular with AUM of $1.1 billion and volume is good as it exchanges nearly 1671,000 shares a day. The product charges 48 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
This fund provides exposure to cloud computing securities by tracking the ISE Cloud Computing Index. Holding about 30 stocks in the basket, Oracles takes the second spot at 5% of assets. Software firms dominate this ETF accounting for 41.4% share while Internet software services (14.3%) and communication equipment (13.3%) round off the next two sectors. The product has been able to manage $967.2 million in its asset base while sees a good volume of about 111,000 shares a day. It has 0.60% in expense ratio and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Tech Face Off: Amazon Versus Alphabet ETFs).
This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $712.3 million in its asset base while trades in volume of around 64,000 shares per day. The ETF charges 50 bps in annual fees. In total, the fund holds about 88 securities in its basket. Of these firms, ORCL takes the sixth position, making up roughly 4.6% of the assets. In terms of industrial exposure, the fund is widely spread out across semiconductor and semiconductor equipment, software, diversified telecommunication services, technology hardware, storage & peripherals, and communication equipment.
This fund focuses on the time-tested multifactor approach that emphasizes factors (smaller cap, lower relative price, and higher profitability) that academic research has linked to higher expected return. It follows the John Hancock Dimensional Technology Index, holding 125 stocks. Out of these, Oracle occupies the sixth position with 3.5% allocation. Software and semiconductors make up for the top two sectors in the fund’s portfolio with over 24% share each while Internet software & services, and technology hardware, storage & peripherals round off the next two spots. The fund has accumulated $55 million in AUM while charging 50 bps in fees per year. Volume is light at around 5,000 shares a day. JHMT has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
This ETF tracks the Dow Jones US Technology Index, giving investors exposure to 136 technology stocks. The fund has AUM of $3.7 billion while charging 44 bps in fees and expenses. Volume is good as it exchanges nearly 187,000 shares in hand a day. Oracle occupies the eight position in the basket with 3.4% of assets. In terms of industrial exposure, software and services makes up for 53.6% share, followed by technology hardware & equipment (27.3%). The fund has a Zacks ETF Rank #1 with a Medium risk outlook (read: Apple ETFs to Watch on 10th-Anniversary iPhone Launch).
The iShares Dow Jones US Technology ETF (NYSE:IYW) was unchanged in premarket trading Monday. Year-to-date, IYW has gained 25.14%, versus a 12.51% rise in the benchmark S&P 500 index during the same period.
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