After the closing bell on Wednesday, one of the tech primes, Cisco Systems CSCOreported better-than-expected fiscal 2018 third-quarter results. The networking giant topped estimates on both revenues and earnings and provided an upbeat outlook.
Results in Detail
Earnings of 66 cents per share outpaced the Zacks Consensus Estimate by a penny and improved 10% from the year-ago earnings.
The networking leader’s transition from its traditional business of high-end switches and routers to high-growth areas such as security, the Internet of Things and cloud computing is paying off. As a result, Cisco now expects revenue growth of 4-6% in the fiscal fourth quarter and earnings per share in the range of 68-70 cents. The mid-point of both the ranges is higher than the Zacks Consensus Estimate, which projects revenue growth of 4.75% and earnings per share of 68 cents (read: Tech ETFs to Lead Again On Power-Packed Earnings).
Despite the solid results and a bullish outlook, Cisco shares declined more than 4% in after-hours trading on heavy volumes. Though the fall may not be justified, the beaten down price could be an attractive opportunity for investors to stock up Cisco shares. This is because Cisco currently has a Zacks Rank #2 (Buy) and a VGM Score of B. The stock has been the second biggest gainer among the Dow components, climbing 18% on a turnaround story. However, it belongs to a bottom-ranked industry ( bottom 18%).
ETFs to Watch
ETFs having the largest allocation to this network giant will be in focus over the coming days. Investors should closely monitor the movement in these funds and grab the opportunity when it arises (see: all the Technology ETFs here):
iShares U.S. Telecommunications ETF IYZ
This fund follows the Dow Jones U.S. Select Telecommunications Index and offers exposure to 45 American companies that provide telephone and Internet products, services, and technologies. Cisco occupies the top position with 15.9% of the assets. The ETF has AUM of $320.3 million and trades in average daily volumes of 350,000 shares. It charges 44 bps in annual fees and has a Zacks ETF Rank #4 (Sell).
iShares North American Tech-Multimedia Networking ETF IGN
This ETF provides a concentrated exposure to domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. Holding 25 securities in its basket, Cisco takes the second spot with a 9% allocation. The product has accumulated $101.5 million in its asset base while seeing a lower volume of around 18,000 shares a day. Expense ratio comes in at 0.48%. The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.
First Trust NASDAQ Technology Dividend Index Fund TDIV