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What's in Store for Semiconductor ETFs in Q4 Earnings?

Sweta Killa

The semiconductor corner of the broad tech space was the outperformer last year buoyed by trade optimism as chip stocks have a lot of exposure to China. They derive a large portion of their revenues from China since it is the world’s biggest chip market and have supply chains in the country (read: Semiconductor Outperforms in 2019: 5 Best ETFs & Stocks).
 
The signing of the initial trade deal led to continued rally in the space with the start of the 2020. iShares PHLX Semiconductor ETF SOXX, VanEck Vectors Semiconductor ETF SMH and First Trust NASDAQ Semiconductor ETF FTXL were up at least 3% each. This upward trend might continue going into the earnings season, given that most stocks are expected to beat on earnings.  

Some well-known players in the space like Texas Instruments TXN, Intel INTC, Qualcomm QCOM, NVIDIA NVDA and Applied Materials AMAT are about to report earnings. Let’s delve into the financial picture of the companies that have higher allocation in the above-mentioned ETFs and the power to move the funds up or down as Q4 earnings unfold. SOXX is largely concentrated on the five firms with a combined share of 35.5% followed by 30.9% for SMH and 18.7% for FTXL.

Per our proven model, 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.

Inside Our Earnings Prediction

Texas Instruments is set to report on Jan 22, after market close. It has a Zacks Rank #3 and an Earnings ESP of 0.00%. The Zacks Consensus Estimate for fourth-quarter earnings has been steady over the past 30 days. The earnings surprise track over the last four quarters has been good, with the beat being 5.67%, on average. The stock has a VGM Score of C (read:  Top Performing ETFs of the Decade).

Intel is slated to release earnings after market close on Jan 23. It has a Zacks Rank #3 and an Earnings ESP of 0.00%. The stock saw no earnings estimate revision over the past 30 days for the to-be-reported quarter and delivered a positive surprise of 10.21%, on average, over the preceding four quarters. It has a top VGM Score of A.

Qualcomm has a Zacks Rank #3 and an Earnings ESP of 0.00%. The stock witnessed no earnings estimate revision over the past 30 days and came up with positive surprise of 8.67% in the trailing four quarters. It has a VGM Score of D. The company is expected to report earnings numbers after the closing bell on Feb 5 (see: all the Technology ETFs here).

NVIDIA, expected to report on Nov 13, is a Zacks #3 Ranked player and has an Earnings ESP of 0.00%. The company delivered positive earnings surprise of 2.47%, on average, over the past four quarters. It saw no earnings estimate revision over the past month for the to-be-reported quarter. The stock has a VGM Score of C.

Applied Materials is a #3 Ranked player and has an Earnings ESP of 0.00%. Its earnings surprise history over the preceding four quarters has been impressive, the beat being 4.89%, on average. The stock witnessed no earnings estimate revision over the past 30 days for the quarter to be reported. The company has a VGM Score of C and is slated to report earnings on Feb 13 (read: 5 Winning ETF Strategies for 2020).

Conclusion

As most companies in this space have seen no negative earnings estimate revisions and have a favorable Zacks Rank, semiconductor ETFs might continue to see smooth trading in the weeks ahead. Further, SOXX, SMH and FTXL have a Zacks ETF Rank #2, implying room for upside.

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Click to get this free report QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report VanEck Vectors Semiconductor ETF (SMH): ETF Research Reports First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Reports iShares PHLX Semiconductor ETF (SOXX): ETF Research Reports NVIDIA Corporation (NVDA) : Free Stock Analysis Report Intel Corporation (INTC) : Free Stock Analysis Report Texas Instruments Incorporated (TXN) : Free Stock Analysis Report Applied Materials, Inc. (AMAT) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report