After the closing bell on Monday, International Business Machines (IBM Quick QuoteIBM - Free Report) reported better-than-expected third-quarter 2016 results. The world’s largest computer-services provider not only topped our earnings and revenue estimates but also broke its long streak of revenue decline in the last 17 quarters.
 
Earnings per share came in at $3.29, well above our estimated $3.21 but down 1% from the year-ago quarter. Revenues remained unchanged year over year at $19.23 billion and outpaced the Zacks Consensus Estimate of $19.01 billion. This suggests that IBM is finally turning around its fortunes as new strategic business lines like cloud computing, big data and mobile security are growing in double digits.

Investors should note that that the company has been shifting its focus from its low-margin business lines such as cash registers, low-end servers and semiconductors to strategic growth areas. In particular, revenues from strategic business climbed 16% year over year in the third quarter and account for 40% of the total revenue (see: all the Technology ETFs here).

For fiscal 2016, the company continues to expect earnings per share of at least $13.50, in line with the Zacks Consensus Estimate.

Despite the fact that the company came closer to the revenue growth era, shares of IBM tumbled as much as 3.7% in aftermarket hours on elevated volume.

ETFs in Focus

Given this, ETFs with the highest allocation to this tech giant will be in focus post IBM results. Investors should closely monitor the movement in these funds and avoid these if the stock drags them down in the coming days:

First Trust NASDAQ Technology Dividend Index Fund (TDIV Quick QuoteTDIV - Free Report)

This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $565.7 million in its asset base while trades in volume of around 77,000 shares per day. It charges 50 bps in annual fees and holds about 98 securities in its basket. Of these firms, IBM takes the fourth spot, making up roughly 7.8% of the assets. In terms of industrial exposure, the fund allocates more than one-fourth portion in semiconductor and semiconductor equipment, followed by diversified telecom services (14.8%), software (14.5%), technology hardware, storage & peripherals (14.1%) and communication equipment (10.2%) (read: Technology Dividend ETFs for Growth & Income).

SPDR Dow Jones Industrial Average ETF (DIA Quick QuoteDIA - Free Report)

This fund follows the Dow Jones Industrial Average, providing exposure to 31 blue-chip U.S. stocks. IBM occupies the third position in the basket with 5.8% share. The ETF is well spread out across a number of sectors with industrials, information technology, financials, consumer discretionary and health care taking the top five spots with a double-digit exposure each. DIA is one of the largest and most popular ETFs in the space with AUM of $11.5 billion and average daily volume of more than 3.1 million shares. It charges 17 bps in annual fees from investors and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook.

Guggenheim Dow Jones Industrial Average Dividend ETF (DJD Quick QuoteDJD - Free Report)

The fund offers an alternative, strategic beta approach to the Dow Jones Industrial Average by weighting each security by dividend yield, rather than price. It follows the Dow Jones Industrial Average Yield Weighted index, holding 31 stocks in its basket. Of these, IBM occupies the fifth position with 4.4% allocation. The product charges 30 bps in annual fees from investors and trades in a paltry volume of around 2,000 shares a day on average. It has accumulated $2.7 million in its asset base so far.

PowerShares S&P 500 High Quality ETF (SPHQ Quick QuoteSPHQ - Free Report)

This fund tracks the S&P 500 Quality Index, a benchmark of the S&P 500 stocks that have the highest quality score based on three fundamental measures: return on equity, accruals ratio and financial leverage ratio. This approach results in a basket of 99 stocks with IBM taking the fifth spot at 4.2% share. From a sector look, the fund is widely spread across consumer discretionary, industrials, consumer staples and information technology with a double-digit exposure each. It has managed $1.1 billion in AUM and trades in solid volume of around 277,000 shares per day on average. Expense ratio comes in at 0.29%. SPHQ has a Zacks ETF Rank of 2 with a Medium risk outlook (read: Quality ETFs and Stocks for a Market-Beating Portfolio).

First Trust Morningstar Dividend Leaders Index Fund (FDL Quick QuoteFDL - Free Report)

With AUM of $1.7 billion, the fund offers exposure to stocks that have shown highest dividend consistency and dividend sustainability by tracking the Morningstar Dividend Leaders Index. In total, it holds 98 stocks with IBM taking the ninth spot in the basket with 4.4% allocation. Information technology and telecom services are the top two sectors accounting for at least 18% of the portfolio each while consumer staples, utilities, and healthcare round off the next spots with a double-digit exposure each. FDL charges 45 bps in annual fees from investors and trades in solid volume of nearly 349,000 shares a day. It has a Zacks ETF Rank of 2 with a Medium risk outlook.

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 >>