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Cisco Beats Estimates, Guides Weak: ETFs in Focus

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After the closing bell on Feb 12, tech prime Cisco Systems (CSCO - Free Report) reported second-quarter fiscal 2020 results. It dampened investors’ sentiments by offering bleak guidance on lower consumer spending. However, the networking giant beat on both earnings and revenues.

Results in Detail

Earnings of 71 cents per share outpaced the Zacks Consensus Estimate by 3 cents and improved 5% from the year-ago earnings. Revenues declined 4% year over year to $12.01 billion and edged past the consensus mark of $11.98 billion (read: Tech ETFs & Stocks Outperforming in 2020).

Cisco expects revenues to decline 1.5-3.5% from the year-ago level, and earnings per share in the range of 79-81 cents for third-quarter fiscal 2020. The Zacks Consensus Estimate is pegged at revenue growth of 2.02% and earnings per share of 81 cents. The weak outlook suggests that its main business of selling networking hardware is still struggling amid tepid spending by corporations and government agencies.

The bleak guidance pushed shares of Cisco down by as much as 4.5% in afterhours trading on heavy volumes. The stock currently has a Zacks Rank #3 (Hold) and VGM Score of C. It belongs to a bottom-ranked industry (bottom 35%).

ETFs to Watch

Given this, the ETF world is also expected to see rough trading, especially the ones which have the largest allocation to this network giant. Below, we have highlighted five of them (see: all the Technology ETFs here):

iShares North American Tech-Multimedia Networking ETF IGN

This ETF provides concentrated exposure to domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. Holding 22 securities in its basket, Cisco takes the third spot with 9% allocation. The product has accumulated $60.6 million in its asset base while seeing a lower volume of around 25,000 shares a day. It charges 46 basis points (bps) in annual fees and carries a Zacks ETF Rank #2 (Buy) with a High risk outlook.

First Trust NASDAQ Technology Dividend Index Fund TDIV

This fund provides exposure to dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $1.2 billion in its asset base and trades in moderate volume of about 85,000 shares per day. The ETF charges 50 bps in annual fees and holds about 93 securities in its basket. Of these firms, CSCO occupies the second position, making up roughly 8.1% of the assets.

First Trust Nasdaq Cybersecurity ETF CIBR

This ETF follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cyber security segment of the technology and industrials sectors. It has accumulated $1.4 billion in its asset base. The fund charges 60 bps in annual fees and trades in average daily volume of about 227,000 shares. In total, the product holds 43 stocks in its basket with Cisco taking the top spot at 6.5%.

First Trust Dow Jones Internet Index FDN

This is one of the most popular and liquid ETFs in the broad tech space with AUM of $8.5 billion and average daily volume of around 354,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 52 bps in fees per year. Holding 42 stocks in its basket, Cisco occupies the third position at 5.6%. The product has a Zacks ETF Rank #2 with a High risk outlook (read: Top Performing ETFs of the Decade).

Invesco Dynamic Networking ETF PXQ

This fund follows the Dynamic Networking Intellidex Index, holding 30 securities in its basket. Of these, Cisco is the third firm, accounting for 5.1% share. The fund is relatively unpopular and illiquid in the broad technology space with AUM of $48.2 million and average daily volume of about 6,000 shares. It charges 63 bps in annual fees and has a Zacks ETF Rank #3 with a High risk outlook.

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