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What Lies in Store for Semiconductor ETFs in Q3 Earnings?

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The semiconductor sector was the biggest victim of the U.S.-China trade dispute, given its significant exposure to China. However, the optimism over the trade deal brought back the lost shine. iShares PHLX Semiconductor ETF (SOXX - Free Report) , VanEck Vectors Semiconductor ETF (SMH - Free Report) and First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) were up more than 6.5% each over the past three months.

This upward trend might continue going into the earnings season, given that most stocks are expected to beat on earnings (read: ETFs to Buy on Phase 1 of U.S.-China Trade Deal).  

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 Applied Materials (AMAT - Free Report) are expected to report earnings this week and in the coming days. Let’s delve into the financial picture of the companies that have 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 the five firms with a combined share of 36.3% followed by 32.3% for SMH and 27.2% 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 22, after market close. It has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. The Zacks Consensus Estimate for third-quarter earnings has been steady over the past 30 days. The earnings surprise track over the last four quarters has been good, with the average beat being 5.07%. The stock has a VGM Score of C.

Intel is slated to release earnings after market close on Oct 24. It has a Zacks Rank #3 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 and delivered a positive surprise of 12.02% on average over the preceding four quarters. It has a top VGM Score of A.

Qualcomm has a Zacks Rank #3 and an Earnings ESP of 0.00%. The stock witnessed no earnings estimate revision over the past 30 days and came up with positive surprise of 8.31% in the trailing four quarters. It has a VGM Score of B. The company is expected to report earnings numbers after the closing bell on Nov 16 (see: all the Technology ETFs here).

NVIDIA, expected to report on Nov 14, is a Zacks #3 Ranked player and has an Earnings ESP of 0.00%. The company delivered positive earnings surprise of 4.54% over the past four quarters. It saw no earnings estimate revision over the past month for the to-be-reported quarter. The stock has a VGM Score of D.

Applied Materials is a #4 Ranked player and has an Earnings ESP of 0.00%. Its earnings surprise history over the preceding four quarters has been impressive, the average beat being 3.84%. The stock witnessed no earnings estimate revision over the past 30 days for the quarter to be reported. The company has a VGM Score of C and is slated to report earnings on Nov 21.

Conclusion

As most companies in this space have seen no negative earnings estimate revisions, semiconductor ETFs might continue to see smooth trading in the weeks ahead. Further, SOXX and SMH have a Zacks ETF Rank #2 while FTXL has a Zacks ETF Rank #3, implying room for an upside (read: Trump May See Easy "Win in 2020:" ETFs to Bet On).

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