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ETFs in Focus on IBM's 4th Straight Quarter of Revenue Drop

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After the closing bell on Jul 17, International Business Machines (IBM - Free Report) reported earnings and revenues beat in second-quarter 2019.

Earnings per share came in at $3.17, surpassing the Zacks Consensus Estimate of $3.06 and the year-ago earnings of $3.08. Revenues fell 4.2% year over year to $19.16 billion, marking the fourth consecutive quarter of sales decline. However, the top line outpaced the consensus estimate of $19.11 billion.

Weakness in its legacy businesses, including mainframes and storage systems, offset growth in its high-margin cloud computing unit. Notably, cloud revenues increased 5% year over year to $19.5 billion (read: Play the Cloud Computing Boom with These ETFs).

The world’s largest computer-services provider reiterated its full-year earnings projection of “at least $13.90” a share. It will update projections on Aug 2. IBM completed its $34 billion Red Hat acquisition last week. The company anticipates the transaction to be accretive to free cash flow in the first year, and accretive to non-GAAP earnings per share by the end of the second year on completion.

Shares of IBM rose as much as 4% in after-market hours but erased all gains to fall 1% at close. The stock has a Zacks Rank #3 (Hold) but boasts a top Value Score of A. It also belongs to a top-ranked Zacks industry (top 43%) (see: all the Technology ETFs here).

ETFs to Watch

Given this, ETFs with the highest allocation to this tech giant will be in focus. Investors should closely monitor the movement of these funds and grab the opportunity whenever it arises or avoid if the stock weighs them down in the days ahead.

First Trust NASDAQ Technology Dividend Index Fund TDIV

This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $996.6 million in its asset base while trading in volume of around 106,000 shares per day. It charges 50 bps in annual fees and holds about 93 securities in its basket. Of these firms, IBM takes the third spot, making up roughly 8% of the assets (read: 5 Market-Beating Dividend ETFs of 1H).

Invesco Dow Jones Industrial Average Dividend ETF DJD

This ETF offers exposure to high-yielding companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 29 stocks in its basket, with IBM occupying the top position with 6.1% allocation. DJD has been able to manage assets worth $68.2 million, while trading in volume of 44,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read: 4 Reasons That Led Dow Jones to 27,000: ETFs in Focus).

WBI Power Factor High Dividend ETF WBIY

This ETF offers exposure to quality stocks that have the highest dividend yield with a deep value bias and multi-factor fundamental analysis. It follows the Solactive Power Factor High Dividend Index, holding 51 stocks in the basket, with IBM taking the third spot at 5%. The product has amassed $102.8 million in its asset base and trades in a lower volume of 33,000 shares a day on average. It charges 70 bps in annual fees.

Schwab U.S. Dividend Equity ETF SCHD

With AUM of $9.8 billion, this product offers exposure to 108 high dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. IBM occupies the seventh position in the basket, with 4.3% of the portfolio. The fund trades in solid volume of 852,000 shares a day and is one of the low-cost choices in the dividend space, charging 6 bps in fees per year. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Tortoise Cloud Infrastructure Fund TCLD

This ETF offers exposure to companies that have the potential to benefit from the expected growing investments, rapid adoption and fast paced innovation of the cloud industry by tracking the Tortoise Global Cloud Infrastructure Index. It holds 45 securities in its basket with IBM taking the fifth spot at 4.6% share. TCLD has been able to gather $4.2 million in asset base since its debut in January and witnesses lower volume of nearly 1,000 shares. It charges 40 bps in annual fees.

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