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ETFs to Gain on Oracle's Q2 Earnings Beat, Upbeat View

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After the closing bell yesterday, software giant Oracle (ORCL - Free Report) reported better-than-expected fiscal second-quarter 2021 results. The company beat the Zacks Consensus Estimate for both earnings and revenues, and provided solid revenue guidance for the ongoing quarter.

Earnings per share came in at $1.06, beating the Zacks Consensus Estimate of $1.00 and improving 19% from the year-ago quarter. Revenues rose 2% year over year to $9.8 billion, slightly above the estimated $9.79 billion. The gain has put Oracle on track to post three consecutive quarters of sales growth after two fiscal years of declining revenues. The remote work has spurred demand for cloud product and software licensing sales (see: all the Technology ETFs here).

Revenues from the two strategic cloud applications businesses — Fusion and NetSuite Cloud ERP applications — grew 33% and 21%, respectively, during the quarter. Notably, these are the major contributors to Oracle's increased operating earnings and earnings per share growth.

Given improving demand for the cloud computing business after years of stagnant sales, Oracle offered an upbeat guidance for the ongoing quarter. It expects revenues to grow 2-4% and adjusted earnings in the range of $1.09-$1.13 per share. The guidance is much higher than the Zacks Consensus Estimate, which projects revenue growth of 1.46% and earnings per share of $1.04 for the ongoing quarter.

Oracle shares declined initially in after-market trade but then rebounded following the upbeat view. The company carries a Zacks Rank #3 (Hold) and has a Value Score of B. It belongs to a bottom-ranked Zacks Industry (bottom 24%).

ETFs in Focus

ETFs with the highest allocation to this software giant are likely to be big movers post Oracle results. Below we have highlighted them:

iShares Expanded Tech-Software Sector ETF (IGV - Free Report)

This ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. The fund holds a basket of 100 securities with Oracle taking the fourth spot at 6.3% of total assets. It is popular with AUM of $5.7 billion and volume is good as it exchanges nearly 813,000 shares a day. The product charges 46 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook (read: Bet on These Top-Ranked Technology ETFs Amid Soaring Covid-19 Cases).

Invesco BuyBack Achievers ETF (PKW - Free Report)

This ETF follows the NASDAQ US BuyBack Achievers Index, which comprises U.S. securities issued by corporations that have effected a net reduction in shares outstanding of 5% or more in the trailing 12 months. It holds a basket of 240 stocks with Oracle taking the sixth position at 4.2% allocation. PKW has accumulated $733.4 million in its asset base and trades in average daily volume of 27,000 shares. It charges 62 bps in annual fees.

First Trust NASDAQ Technology Dividend Index Fund (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 $1.3 billion in its asset base and trades in moderate volume of about 80,000 shares per day. The ETF charges 50 bps in annual fees and holds about 85 securities in its basket. Of these firms, ORCL occupies the ninth position, making up roughly 4% of the assets.

First Trust Cloud Computing ETF (SKYY - Free Report)

This fund provides exposure to cloud-computing securities by tracking the ISE Cloud Computing Index. Holding about 64 stocks in the basket, Oracle takes the fifth spot at 3.8%. The product has been able to manage $5.7 billion in its asset base while seeing a good volume of about 378,000 shares a day. It has 0.60% in expense ratio and a Zacks ETF Rank #1 with a Medium risk outlook (read: Here's Why Cloud Computing ETFs Are Hot Right Now).

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