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Cisco's Robust Q3 Results Put These ETFs in Focus

Sweta Killa

Tech prime Cisco Systems CSCO reported robust third-quarter fiscal 2020 results amid the global pandemic, which is worse than the dot-com crash of 2000 and the Great Recession of 2008. The networking giant beat on both earnings and revenues and provided a solid guidance, stating that demand for tech gear and security support due to prolonged work from home during the coronavirus pandemic will help support near-term sales (see: all the Technology ETFs here).

Results in Detail

Earnings of 72 cents per share outpaced the Zacks Consensus Estimate by 9 cents and improved a cent from the year-ago earnings. Revenues declined 8% year over year to $12 billion but edged past the consensus mark of $11.87 billion. Stronger-than-expected earnings and revenue performance was driven by a boom in remote work and online activity due to coronavirus crisis that raised demand for the company’s network equipment.

The company saw a huge surge in use of its WebEx videoconferencing software, with so many people working from home (read: Hot ETFs to Tap Consumers' Digital Shift Amid Coronavirus).

Cisco expects revenues to decline 8.5-11.5% from the year-ago level, and earnings per share in the range of 72-74 cents for fourth-quarter fiscal 2020. The Zacks Consensus Estimate for earnings per share is 69 cents while the same for revenues indicates decline of 10.7%.

The robust results pushed shares of Cisco up by as much as 4.5% in yesterday’s trading. The stock currently has a Zacks Rank #3 (Hold) and a VGM Score of B. It belongs to a top-ranked industry (top 25%).

ETFs to Watch

Given this, the ETF world has also saw solid trading, especially the ones which have the largest allocation to this network giant. Below, we have highlighted five of them:

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 fourth spot with 8.6% allocation. The product has accumulated $41.8 million in its asset base while seeing a lower volume of around 19,000 shares a day. It charges 46 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 billion in its asset base and trades in moderate volume of about 148,000 shares per day. The ETF charges 50 bps in annual fees and holds about 89 securities in its basket. Of these firms, CSCO occupies the third position, making up roughly 8.4% of the assets (read: Fearing a Cut in Current Income? 5 Safe Dividend ETFs).

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 $1.5 billion in its asset base. The fund charges 60 bps in annual fees and trades in average daily volume of about 382,000 shares. In total, the product holds 44 stocks in its basket with Cisco taking the third spot at 5.9% (read: Cyber Security ETFs to Thrive in the Virus-Hit Economy).

Invesco Dynamic Networking ETF PXQ

This fund follows the Dynamic Networking Intellidex Index, holding 29 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 $46.7 million and average daily volume of about 7,000 shares. It charges 63 bps in annual fees and has a Zacks ETF Rank #3 with a High risk outlook.

First Trust Dow Jones Internet Index FDN

This is one of the most popular and liquid ETFs in the broader tech space with AUM of $7.9 billion and average daily volume of around 536,000 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 fifth position at 4.3%. The product has a Zacks ETF Rank #2 with a High risk outlook (read: 6 ETF Areas Beating S&P 500 in 2020).

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