ETFs to Tap on Cisco's Upbeat Q4 Results

One of the tech primes – Cisco Systems (CSCO) – cheered investors in after-hour trading following its second-quarter fiscal 2016 results. The company topped our estimates on both earnings and revenues, and increased its dividend and stock-buyback program, sending shares of Cisco up over 9% in the aftermarket hours (read: Bubbles Bursting For Technology ETFs?).

Cisco Q2 Results in Focus

Earnings of 53 cents per share were nine cents ahead of the Zacks Consensus Estimate. Revenues rose 2% year over year to $11.8 billion and were ahead of our estimate of $11.75 billion. This represents the ninth consecutive quarter of a revenue beat. The better-than-expected performance was primarily driven by greater demand for its routers and security products.

The networking leader is focusing on high-end switches and routers, and investing in new products such as data analytics software and cloud-based tools for data centers through acquisitions. It expects revenues to grow 1–4% year over year and earnings per share in the range of 54–56 cents for the ongoing fiscal third quarter. The midpoint of the guidance is much above the Zacks Consensus Estimate of 51 cents.

Based on solid results, the company boosted its quarterly dividend by 24% to 26 cents per share and raised the share buyback program by $15 billion.

ETFs to Watch

Given upbeat earnings results and the soaring share price, investors may want to flock into the company’s stock in a basket form. For them, we have highlighted ETFs having the largest allocation to this world’s largest network equipment maker that could be nice plays to tap it’s growth in the days ahead (see: all the Technology ETFs here):
 
iShares North American Tech-Multimedia Networking ETF (IGN)

This ETF provides a concentrated exposure to the domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. Holding 26 securities in its basket, Cisco takes the fourth spot with an 8.6% allocation. The product has a definite tilt toward small cap securities that account for 43%, followed by mid caps at 34%. It has accumulated $49.9 million in its asset base while sees a moderate volume of around 71,000 shares a day. Expense ratio comes in at 0.48%. The fund has shed 18.4% in the year-to-date timeframe and has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a High risk outlook.

First Trust NASDAQ Technology Dividend Index Fund (TDIV)

This fund provides exposure to the dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $482.9 million in its asset base and trades in moderate volume of about 98,000 shares per day. The ETF charges 50 bps in annual fees and holds about 97 securities in its basket. Of these firms, CSCO occupies the third position, making up roughly 7.5% of the assets. In terms of industrial exposure, the fund allocates nearly one-fifth portion in semiconductor and semiconductor equipment, followed by diversified telecom services (16.8%), software (15.8%), technology hardware, storage & peripherals (15.4%), and communications equipment (13.4%). The fund is down 9.3% so far this year.

First Trust NASDAQ CEA 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 nearly $105.8 million in its asset base. The fund charges 60 bps and trades in a moderate average daily volume of about 68,000 shares. In total, the product holds 34 stocks in its basket, with Cisco taking the top spot at 6.5%. It is skewed toward the software industry at 46.6%, while communications equipment round off the next spot with a double-digit allocation. The fund has lost 20.3% in the year-to-date timeframe (read: ETFs in Focus on Rumored Check Point Buyout of CyberArk).
 
PowerShares Dynamic Networking Portfolio (PXQ)

This fund follows the Dynamic Networking Intellidex Index, holding 29 securities in its basket. Out of these, Cisco is the fourth firm accounting for 5.6% share. From a sector look, communication equipment dominates the fund’s portfolio at 48% of the assets, followed by 32% in software and programming. The fund is unpopular and illiquid in the broad tech space with AUM of $18.1 million and average daily volume of about 4,000 shares. It charges 63 bps in annual fees and has lost 18.1% in the year-to-date time frame. PXQ has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook.

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CISCO SYSTEMS (CSCO): Free Stock Analysis Report
 
ISHARS-NA TEC-M (IGN): ETF Research Reports
 
FT-NDQ TECH DIF (TDIV): ETF Research Reports
 
FT-NDQ CYBERSEC (CIBR): ETF Research Reports
 
PWRSH-DYN NTWRK (PXQ): ETF Research Reports
 
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