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Solid Q4 Earnings Power Cybersecurity ETFs

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Cyber security stocks have been rallying lately on stronger-than-expected earnings. Most of the cybersecurity firms beat the Zacks Consensus Estimate for both earnings and revenues and offered robust guidance.

Let’s check out the fourth-quarter results of some of the cyber security firms that have the largest allocation to the ETFs in this niche area of the technology sector:

Cybersecurity Earnings in Focus

Fortinet (FTNT - Free Report) posted earnings per share of 67 cents and revenues of $614 million, easily topping the Zacks Consensus Estimate of 47 cents and $604 million, respectively. On a year-over-year basis, earnings and revenues increased 21% and 19%. The company projects revenues in the range of $555-$565 million and earnings per share of 50-52 cents for the first quarter. For 2020, it expects revenues in the range of $2.525-$2.555 billion and earnings per share of $2.70-$2.73.

Akamai Technologies (AKAM - Free Report) topped earnings per share and revenue estimates by 11 cents and $22 million, respectively. The bottom line increased 15% from the year-ago quarter while revenues improved 8%. For the first quarter of 2020 and full year, the company expects earnings per share in the range of $1.13-$1.18 and $4.80-$4.95, respectively. Revenues are expected in the range of $741-$755 million for the first quarter and $3.055-$3.105 billion for the full year (see: all the Technology ETFs here).

Proofpoint (PFPT - Free Report) outpaced the Zacks Consensus Estimate by 10.6% for earnings and 1.6% for revenues. Earnings per share climbed 1.9% from the year-ago quarter while revenues jumped 23%. For the first quarter, the company expects revenues in the range of $246-$248 million and earnings per share of 25-29 cents. For the full year, Proofpoint raised revenue guidance to $1.060-$1.067 billion from the previous projection of $1.050-$1.062 billion and projects earnings per share of $1.42-$1.48.

Check Point Software Technologies (CHKP - Free Report) posted earnings per share of $1.86, outpacing the Zacks Consensus Estimate of $1.81 while revenues of $544 million met the consensus mark. On year-over-year basis, earnings grew 21% while revenues were up 3%. For the first quarter of 2020, the company expects earnings per share in the range of $1.37-$1.43 and revenues in the $475-$495 million band.

CyberArk Software (CYBR - Free Report) outpaced the Zacks Consensus Estimate by 6 cents for earnings and $3 million for revenues. Earnings per share was higher than the year-ago figure of 89 cents while revenues grew 19%. The company expects earnings per share of 78-82 cents on revenues of $125-$127 million, representing 15-16% year-over-year growth for the first quarter. For full year, CyberArk projects revenues in the range of $511-$519 million and earnings per share of $2.26-$2.38.

ETFs in Focus

The string of earnings beats and solid guidance led cybersecurity ETFs to perform better than the other technology peers. ETFMG Prime Cyber Security ETF (HACK - Free Report) and First Trust NASDAQ CEA Cybersecurity ETF (CIBR - Free Report) gained at least 4% so far this month. Below we have highlighted them in detail:

HACK in Focus

The fund provides global exposure to the cybersecurity industry comprising companies that offer hardware, software, consulting and services to defend against cybercrime. It tracks the Prime Cyber Defense Index, holding 56 securities in its basket. It is well spread out across components with the in-focus five firms accounting for around 3% share each. From an industrial look, systems software accounts for nearly 60% of the portfolio while communication equipment and IT consulting round off the next two. The fund has amassed $1.5 billion in AUM and charges 60 basis points (bps) in fees per year. Volume is solid as it exchanges nearly 188,000 shares in hand per day (read: Best Thematic ETFs for 2020).

CIBR in Focus

This ETF has accumulated nearly $1.5 billion in its asset base and charges 60 bps in annual fees. It trades in moderate average daily volume of around 196,000 shares. The fund follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. In total, the product holds 42 stocks in its basket with the in-focus firms accounting for around 34% share each. It is skewed toward the software at 54.2% while IT services and communications equipment takes the next spot with double-digit allocation (read: Cisco Beats Estimates, Guides Weak: ETFs in Focus).

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