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Intel (INTC - Analyst Report), the world’s largest chip maker, reported uninspiring Q4 results after the market closed yesterday. Though the company reported higher-than-expected revenues, it missed on the earnings front. In addition, the weak revenue outlook for full fiscal 2014 dampened investors’ mood.
Intel Earnings in Focus
The company reported earnings of 51 cents per share, a penny below the Zacks Consensus Estimate but 3 cents above the year-ago earnings. Revenues rose 3% year-over-year to $13.83 billion, and inched past the Zacks Consensus Estimate of $13.72 billion. This represents the best revenue growth in six quarters.
According to the CEO of the company, the fourth quarter turned out to be solid thanks to a stabilizing PC market. Additionally, the company is bringing innovative technologies in order to offset slowing PC sales (read: Guide to China Technology ETFs).
For the first quarter of 2014, Intel expects revenues in the range of $12.3–$13.3 billion and gross margin at around 59%. Revenues for the full year are likely to remain flat with the prior year. Wall Street, however, foresees around 1% growth in Intel’s full-year revenues. Gross margin is expected to be around 60% for 2014.
The discouraging revenue outlook for 2014, despite the fact that the industry falls in the top 29% as per the Zacks Industry Rank, disappointed investors and resulted in the slump in the stock following the earnings announcement. INTC shares fell nearly 5% in the after-market hours on heavy volumes of more than six million shares (read: A Comprehensive Guide to Semiconductor ETFs).
ETFs to Watch
The sluggish trading could have a huge impact on ETFs that are heavily invested in this biggest semiconductor company. Below, we have highlighted three ETFs with the highest allocation to INTC that could see some losses in today’s trading session and are in focus following Intel’s earnings:
Market Vectors Semiconductor ETF (SMH - ETF report)
This is easily the most popular and liquid ETF in the semiconductor space with AUM of $303.9 million and average daily volume of roughly 1.2 million shares. The fund provides concentrated exposure to 26 global securities by tracking the Market Vectors US Listed Semiconductor 25 Index. Intel occupies the top position with 20.03% of assets.
While U.S. firms dominate the fund holdings at 73.7% of assets, Taiwan (12.4%), the Netherlands (4.9%) and United Kingdom (4.9%) round off to the next three spots in terms of country exposure. The fund charges an expense ratio of 0.35%. SMH gained about 2% over the past 10 days and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a ‘Medium’ risk outlook.
iShares PHLX Semiconductor ETF (SOXX - ETF report)
This ETF follows the PHLX Semiconductor Sector Index and offers exposure to 31 firms. The fund has amassed $263.8 million in its asset base while trades in volume of more than 115,000 shares a day. The product charges a higher fee of 48 bps a year from investors (see: all the Technology ETFs here).
Here again, INTC takes the top spot at 8.36% of total assets. The fund added nearly 2.5% in the past 10 trading sessions and currently has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a ‘High’ risk outlook.
First Trust NASDAQ Technology Dividend Index Fund (TDIV - ETF report)
This fund provides exposure to the dividend payers of the broad technology space by tracking the Nasdaq Technology Dividend Index. The product has amassed about $285.2 million in its asset base while charging 50 bps in annual fees. Volume is moderate as it exchanges less than 80,000 shares per day (read: 3 Best Dividend ETFs of 2013).
In total, the fund holds about 87 securities in its basket. Of these firms, INTC takes the first spot, making up roughly 8.65% of the assets. In terms of industrial exposure, the fund allocates one-fourth portion in semiconductor and semiconductor equipment, followed by software (14.88%), and computer and peripherals (14.27%). The fund returned nearly 2% over the past 10 trading sessions.
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