ETFs Set to Gain on Cisco's Robust Results

After the closing bell on Wednesday May 15, tech prime Cisco Systems CSCO delivered robust third-quarter fiscal 2019 results. The networking giant beat on both earnings and revenues and also provided an upbeat outlook.

Results in Detail

Earnings of 78 cents per share outpaced the Zacks Consensus Estimate by a penny and improved 18% from the year-ago earnings. Revenues rose 4% year over year to $12.96 billion and edged past the consensus mark of $12.87 billion This upside marks the sixth straight quarter of revenue growth. The company’s strong results were driven by a minimal sales exposure in China and changes to its supply chains that helped shrugging off the impact of the U.S.-China trade dispute.

This networking leader’s transition from its traditional business of high-end switches and routers to high-growth areas, such as security, the IoT and cloud computing is clearly paying off. As a result, Cisco now expects revenue growth of 4.5-6.5% and earnings per share in the range of 80-82 cents in fourth-quarter fiscal 2019. The mid-point of both the ranges is above the Zacks Consensus Estimate of 3.3% for revenue growth and the earnings per share of 80 cents (see: all the Technology ETFs here).

Buoyed by solid results and an encouraging guidance, shares of Cisco gained as much as 3% in after-hours trading on heavy volumes. The stock currently has a Zacks Rank #2 (Buy) and a VGM Score of B. However, it belongs to a bottom-ranked industry (bottom 11%).

ETFs to Watch

Given this scenario, the ETF world is also expected to see smooth trading following the impressive Cisco results. Below, we highlight five ETFs flaunting the largest allocation to this network giant:

iShares U.S. Telecommunications ETF IYZ

This fund follows the Dow Jones U.S. Select Telecommunications Index and offers exposure to 42 American companies that provide telephone and Internet products, services and technologies. Cisco occupies the second position with 23.1% of the assets. The ETF has AUM of $453.2 million and trades in average daily volumes of 587,000 shares. It charges 43 bps in annual fees and has a Zacks ETF Rank 2 with a Medium risk outlook (read: Telecom ETFs in Focus on String of Q1 Earnings Beats).

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 20 securities in its basket, Cisco takes the second spot with 9.2% allocation. The product has accumulated $144.9 million in its asset base while seeing a lower volume of around 41,000 shares a day. Expense ratio comes in at 0.47%. The fund sports a Zacks ETF Rank #1 (Strong Buy) 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 $939.4 million in its asset base and trades in moderate volume of about 118,000 shares per day. The ETF charges 50 bps in annual fees and holds about 93 securities in its basket. Of these firms, CSCO occupies the fourth position, making up roughly 8% of the assets (read: Least-Hurt Tech ETFs as China Hits Back).

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 $851 million in its asset base. The fund charges 60 bps in annual fees and trades in average daily volume of about 182,000 shares. In total, the product holds 45 stocks in its basket with Cisco taking the top spot at 6.4%.

Invesco Dynamic Networking ETF PXQ

This fund follows the Dynamic Networking Intellidex Index, holding 29 securities in its basket. Of these, Cisco is the third firm, accounting for 5.3% share. The fund is relatively unpopular and illiquid in the broad technology space with AUM of $93.2 million and average daily volume of about 13,000 shares. It charges 63 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
 
First Trust NASDAQ Technology Dividend Index Fund (TDIV): ETF Research Reports
 
Invesco Dynamic Networking ETF (PXQ): ETF Research Reports
 
iShares U.S. Telecommunications ETF (IYZ): ETF Research Reports
 
iShares North American Tech-Multimedia Networking ETF (IGN): ETF Research Reports
 
First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports
 
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