Back to top

Image: Bigstock

What's in Store for Semiconductor ETFs in Q3 Earnings?

Read MoreHide Full Article

Semiconductor stocks have been rallying this year and hit new peaks on several occasions. The pandemic has bolstered demand for chips by leaps and bounds, leading to the worst global shortage in many years.

As such, iShares Semiconductor ETF (SOXX - Free Report) and VanEck Vectors Semiconductor ETF (SMH - Free Report) have gained about 4% over the past three months while First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) has added 3%. The solid trend might continue in the weeks ahead going into the earnings season (read: Semiconductor ETFs Soaring to New Heights).  

Some well-known players in the space like Texas Instruments (TXN - Free Report) , Intel (INTC - Free Report) , Qualcomm (QCOM - Free Report) , NVIDIA (NVDA - Free Report) and Advanced Micro Devices (AMD - Free Report) will report earnings in the coming days. Let’s delve into the financial picture of the companies that have a higher allocation in the above-mentioned ETFs and the power to move the funds up or down as Q3 earnings unfold. SOXX is largely concentrated on five firms with a combined share of 31.6% followed by 31.2% for SMH and 23.2% for FTXL.

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Earnings Prediction

Texas Instruments is set to report on Oct 26, after market close. It has a Zacks Rank #2 and an Earnings ESP of +9.22%. The stock saw positive earnings estimate revision by a couple of cents over the past 30 days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The earnings surprise track over the last four quarters has been good, with the beat being 20.25%, on average.

Intel is slated to release earnings after market close on Oct 21. It has a Zacks Rank #4 and an Earnings ESP of 0.00%. The stock saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. Intel delivered an earnings surprise of 20.18%, on average, for the preceding four quarters.

Qualcomm has a Zacks Rank #3 and an Earnings ESP of +0.35%. The stock witnessed no earnings estimate revision over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 13.48% in the trailing four quarters, on average. The company is expected to report earnings after the closing bell on Nov 3 (see: all the Technology ETFs here).

NVIDIA, expected to report on Nov 17, has a Zacks Rank #2 and an Earnings ESP of +0.30%. The company delivered an earnings surprise of 9.63%, on average, over the past four quarters. It saw no earnings estimate revision over the past 30 days for the quarter to be reported.

Advanced Micro Devices has a Zacks Rank #2 and an Earnings ESP of +2.31%. Its earnings surprise history is impressive, with the average beat being 14.85% for the preceding four quarters. The stock witnessed no earnings estimate revision over the past 30 days for the quarter to be reported. The company is slated to report earnings on Oct 26 after the closing bell (read: 5 Top-Ranked Chip ETFs to Gain on Ongoing Supply Crisis).

Conclusion

As most companies in this space are expected to beat on earnings and have seen positive earnings estimate revision activity, semiconductor ETFs might see smooth trading in the weeks ahead. Further, SOXX, SMH and FTXL have a Zacks ETF Rank #1, suggesting their continued outperformance.