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IBM to Report Q1 Earnings After Market Close: ETFs in Focus

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International Business Machines IBM is scheduled to report first-quarter 2020 results on Apr 20 after market close. Being the world’s largest computer-services provider, it is worth taking a look at its fundamentals ahead of results.

IBM has shed 13.7% over the past three months and underperformed the industry, which has declined 12.4% in the said time frame. The negative trend is expected to reverse as IBM saw increasing earnings estimates for the yet-to-be-reported quarter right before the earnings announcement (see: all the Technology ETFs here).

Inside Our Methodology

IBM has a Zacks Rank #4 (Sell) and an Earnings ESP of -4.30%. According to our methodology, 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.

The stock has seen positive earnings estimate revision of a penny for the first quarter over the last seven days. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Its earnings track record is also impressive, with the average four-quarter positive earnings surprise being 1.84%. However, the Zacks Consensus Estimate indicates substantial earnings decline of 24.4% from the year-ago quarter. IBM projects modest year-over-year revenue decline of 1.2%. The stock has a VGM Score of D and belongs to a bottom-ranked Zacks industry (bottom 30%).

The Zacks Consensus Estimate for average target price is $139.00 with 33% of the analysts having a Strong Buy or a Buy rating and 67% having a Hold rating ahead of earnings. This represents nearly 16.7% upside from the current price.

ETFs in Focus

Given this, ETFs having the highest allocation to this this tech giant will be in focus. These funds could be potential movers if IBM surprises the market:

First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report)

This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed more than $1 billion in its asset base while trading in volume of around 137,000 shares per day. It charges 50 bps in annual fees and holds about 92 securities in its basket. Of these firms, IBM takes the fifth spot, making up roughly 7.7% of the assets.

Invesco S&P Ultra Dividend Revenue ETF (RDIV - Free Report)

This product invests in securities on the S&P 900 which excludes the top 5% of securities by dividend yield, top 5% of securities within each sector by dividend payout ratio, selects the top 60 securities by dividend yield and re-weighs those securities according to the revenue earned with a maximum 5% per company weighting. The fund holds 59 stocks in its basket, with IBM taking the third spot with 6.6% share. It has AUM of $732.8 million and average daily volume of 269,000 shares. The product charges 39 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)

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 30 stocks in its basket, with IBM occupying the fourth position with 5.5% allocation. DJD has been able to manage assets worth $113.4 million, while trading in volume of 43,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read: What's in Store for Dow ETFs in Q1 Earnings?).

Global Beta Smart Income ETF (GBDV - Free Report)

This product is designed to provide exposure to dividend paying stocks within the S&P 900 with the highest average 12-month trailing dividend yield over each of the prior four quarters by tracking the Global Beta Smart Income Index. It holds 73 securities in its basket with IBM taking the fourth spot at 5.30%. GBDV launched on late December with zero management fees for the first six months through Jun 30, 2020. It has gathered $1.4 million in its asset base and trades in average daily volume of 4,000 shares.

First Trust Morningstar Dividend Leaders Index Fund (FDL - Free Report)

With AUM of $1.3 billion, the fund offers exposure to stocks that have shown highest dividend consistency and dividend sustainability by tracking the Morningstar Dividend Leaders Index. It holds 100 stocks with IBM taking the ninth spot in the basket with 4.4% allocation. FDL charges 45 bps in annual fees from investors and trades in solid volume of more than 349,000 shares a day. It has a Zacks ETF Rank #3 with a Medium risk outlook (read: 6 Overlooked High-Yielding ETFs in Focus Post Fed Minutes).

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