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ETFs to Watch on Cisco's Better-Than-Expected Q4 Results
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One of the tech majors, Cisco Systems, Inc. (CSCO - Free Report) reported better-than-expected fourth quarter fiscal 2016 results after markets closed on Wednesday but announced around 7% reduction in its workforce. Though the company managed to beat our estimates on both the top and bottom lines, the layoff announcement had a negative impact on its shares, which dropped around 1.4% in after-hour trading.
Cisco’s Q4 Performance
Earnings of 58 cents per share came in 3 cents ahead of the Zacks Consensus Estimate. Revenues of $12.64 billion also beat our estimate of $12.55 billion. Though revenues saw a 2% year-on-year drop, non-GAAP operating income during the quarter increased 7% from the year-ago period to $4 billion. The better-than-expected performance was primarily driven by strong growth in software and subscriptions (read: Time to Buy These Tech ETFs?).
Chuck Robbins, CEO of Cisco said: “The balance of the business was healthy with 5% order growth. This growth and balance demonstrates the strength of our diverse portfolio. Our product deferred revenue from software and subscriptions grew 33% showing the continued momentum of our business model transformation."
The world’s largest network equipment maker anticipates year-on-year revenue growth between negative 1% and 1% in the ongoing fiscal first quarter. Meanwhile, it expects non-GAAP earnings per share during the first quarter of fiscal 2017 to come in between 58 cents and 60 cents. The Zacks Consensus Estimate is currently pegged at 55 cents (read: Technology Dividend ETFs for Growth & Income).
Despite the better-than-expected fourth-quarter results, the company saw a decline in its share price during after-hour trading on Wednesday after it announced its plans to eliminate up to 5,500 positions (or 7%) from its overall workforce. Per the company, this restructuring effort is meant to “optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT (Internet of Things), collaboration, next generation data center and cloud.”
ETFs in Focus
Given Cisco’s results, ETFs with significant allocation to this network giant will be in focus in the days ahead. Investors should closely monitor the movement in these funds to grab the available opportunities or avoid the fund if the stocks are down (see all Technology ETFs here).
iShares North American Tech-Multimedia Networking
This ETF provides concentrated exposure to domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. The fund holds 25 securities in its basket with Cisco taking the third spot with an 8.6% allocation. The product has a definite tilt toward small cap securities that account for 41% share of the basket, followed by mid-caps at 37%. It has accumulated $62.1 million in its asset base and sees a moderate volume of around 91,000 shares a day. Its expense ratio is 0.48%. The fund has rose 5.6% in the last one month and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
First Trust NASDAQ Technology Dividend ETF (TDIV - Free Report)
This fund provides exposure to the dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $540.9 million in its asset base and trades in moderate volume of about 70,000 shares per day. The ETF charges 50 bps in annual fees and holds about 92 securities in its basket. Of these, CSCO occupies the fourth position, making up roughly 7.9% of the assets. In terms of industrial exposure, the fund allocates more than one-fourth portion to semiconductor and semiconductor equipment, followed by software (15.3%) and technology hardware, storage & peripherals (14.5%). The fund has returned 3.1% over the past one month (read: Follow Goldman Sachs' Strategy with These ETFs).
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 nearly $96.7 million in its asset base. The fund charges 60 bps and trades in an average daily volume of about 26,000 shares. In total, the product holds 34 stocks in its basket, with Cisco taking the second spot at 6%. It is skewed toward the software industry at 50.5%, while communications equipment rounds off the next spot with a double-digit allocation. The fund was up 3.3% in the last one month.
JHancock Multifactor Technology ETF
This fund follows the John Hancock Dimensional Technology Index, holding 120 securities in its basket. Out of these, Cisco occupies the fifth position accounting for 4.8% share. From a sector look, semiconductor dominates the fund’s portfolio at 26.7% of the assets, followed by 24.6% in software. The fund is unpopular and illiquid in the broad tech space with an AUM of $20.6 million and an average daily volume of about 1,000 shares. It charges 50 bps in annual fees and has returned 4% over the past one month. JHMT has a Zacks ETF Rank #3 (Hold).
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ETFs to Watch on Cisco's Better-Than-Expected Q4 Results
One of the tech majors, Cisco Systems, Inc. (CSCO - Free Report) reported better-than-expected fourth quarter fiscal 2016 results after markets closed on Wednesday but announced around 7% reduction in its workforce. Though the company managed to beat our estimates on both the top and bottom lines, the layoff announcement had a negative impact on its shares, which dropped around 1.4% in after-hour trading.
Cisco’s Q4 Performance
Earnings of 58 cents per share came in 3 cents ahead of the Zacks Consensus Estimate. Revenues of $12.64 billion also beat our estimate of $12.55 billion. Though revenues saw a 2% year-on-year drop, non-GAAP operating income during the quarter increased 7% from the year-ago period to $4 billion. The better-than-expected performance was primarily driven by strong growth in software and subscriptions (read: Time to Buy These Tech ETFs?).
Chuck Robbins, CEO of Cisco said: “The balance of the business was healthy with 5% order growth. This growth and balance demonstrates the strength of our diverse portfolio. Our product deferred revenue from software and subscriptions grew 33% showing the continued momentum of our business model transformation."
The world’s largest network equipment maker anticipates year-on-year revenue growth between negative 1% and 1% in the ongoing fiscal first quarter. Meanwhile, it expects non-GAAP earnings per share during the first quarter of fiscal 2017 to come in between 58 cents and 60 cents. The Zacks Consensus Estimate is currently pegged at 55 cents (read: Technology Dividend ETFs for Growth & Income).
Despite the better-than-expected fourth-quarter results, the company saw a decline in its share price during after-hour trading on Wednesday after it announced its plans to eliminate up to 5,500 positions (or 7%) from its overall workforce. Per the company, this restructuring effort is meant to “optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT (Internet of Things), collaboration, next generation data center and cloud.”
ETFs in Focus
Given Cisco’s results, ETFs with significant allocation to this network giant will be in focus in the days ahead. Investors should closely monitor the movement in these funds to grab the available opportunities or avoid the fund if the stocks are down (see all Technology ETFs here).
iShares North American Tech-Multimedia Networking
This ETF provides concentrated exposure to domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. The fund holds 25 securities in its basket with Cisco taking the third spot with an 8.6% allocation. The product has a definite tilt toward small cap securities that account for 41% share of the basket, followed by mid-caps at 37%. It has accumulated $62.1 million in its asset base and sees a moderate volume of around 91,000 shares a day. Its expense ratio is 0.48%. The fund has rose 5.6% in the last one month and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
First Trust NASDAQ Technology Dividend ETF (TDIV - Free Report)
This fund provides exposure to the dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $540.9 million in its asset base and trades in moderate volume of about 70,000 shares per day. The ETF charges 50 bps in annual fees and holds about 92 securities in its basket. Of these, CSCO occupies the fourth position, making up roughly 7.9% of the assets. In terms of industrial exposure, the fund allocates more than one-fourth portion to semiconductor and semiconductor equipment, followed by software (15.3%) and technology hardware, storage & peripherals (14.5%). The fund has returned 3.1% over the past one month (read: Follow Goldman Sachs' Strategy with These ETFs).
First Trust NASDAQ Cybersecurity ETF (CIBR - Free Report)
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 nearly $96.7 million in its asset base. The fund charges 60 bps and trades in an average daily volume of about 26,000 shares. In total, the product holds 34 stocks in its basket, with Cisco taking the second spot at 6%. It is skewed toward the software industry at 50.5%, while communications equipment rounds off the next spot with a double-digit allocation. The fund was up 3.3% in the last one month.
JHancock Multifactor Technology ETF
This fund follows the John Hancock Dimensional Technology Index, holding 120 securities in its basket. Out of these, Cisco occupies the fifth position accounting for 4.8% share. From a sector look, semiconductor dominates the fund’s portfolio at 26.7% of the assets, followed by 24.6% in software. The fund is unpopular and illiquid in the broad tech space with an AUM of $20.6 million and an average daily volume of about 1,000 shares. It charges 50 bps in annual fees and has returned 4% over the past one month. JHMT has a Zacks ETF Rank #3 (Hold).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>