Send me real-time posts from this site at my email
Zacks

ETFs to Ride on IBM's Revenue Growth Story

After the closing bell on Wednesday, International Business Machines IBM posted better-than-expected second-quarter 2018 results buoyed by growth in new businesses (read: 5 Excellent ETF Plays as Q2 Earnings Cycle Begins).

Earnings per share came in at $3.08, well above the Zacks Consensus Estimate of $3.03 and the year-ago earnings of $2.97. Revenues rose 4% year over year to $20 billion and edged past the estimated $19.6 billion. This marks the third consecutive quarter of revenue growth, which reflects a strong turnaround after nearly six year of shrinking quarterly sales under chief executive officer, Ginni Rometty.

New strategic growth businesses including cloud computing, security software, data analytics, and artificial intelligence generated $10.1 billion in the second quarter and now accounts for more than half of overall revenues.

The world’s largest computer-services provider reiterated its full-year earnings outlook of “at least $13.80” a share. The Zacks Consensus Estimate is pegged at $13.84 for this year, indicating a modest 0.29% growth from the last year.

IBM has a Zacks Rank #3 (Hold) and boasts a top Value and Momentum Score of A each. It also belongs to a top-ranked Zacks industry (top 31%).

ETFs in Focus

Given the solid results, IBM is expected to see smooth trading in the days ahead. As such, investors could tap the opportunity with ETFs having the highest allocation to this tech giant (see: all the Technology ETFs here):

First Trust NASDAQ Technology Dividend Index Fund TDIV

This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $898.2 million in its asset base while trading in volume of around 83,000 shares per day. It charges 50 bps in annual fees and holds about 94 securities in its basket. IBM takes the second spot in the fund, making up roughly 8.02% of the assets. In terms of industrial exposure, the fund allocates about 25.9% of the portfolio in semiconductor and semiconductor equipment, followed by technology hardware, storage & peripherals (15.6%), software (15.04%), and diversified telecom services (12.3%) (read: Let Your Portfolio Mirror Buffett's With These ETF Strategies).

Invesco Dow Jones Industrial Average Dividend ETF DJD

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 29 stocks in it basket, with IBM occupying the seventh position with 4.85% allocation. Information technology, healthcare, consumer staples and energy are the top four sectors. DJD has been able to manage assets worth $13.7 million while trading in volume of 7,000 shares a day on average. It charges 30 bps in annual fees and has a Zacks ETF Rank #3 (Hold).

Innovation Shares NextGen Protocol ETF KOIN

This product follows the Innovation Labs Blockchain Innovators Index, which measures the performance of a diversified group of publicly-listed companies that use, or are involved in, blockchain. Holding 45 stocks in its portfolio, IBM is the eleventh firm with 4.4% share. The ETF has the largest allocation to information technology sector at 67% while financials, consumer discretionary and energy round off the next three spots. It has accumulated $7.7 million in its asset base since its debut in late January and trades in average daily volume of 11,000 shares. Expense ratio comes in at 0.65%.

Schwab U.S. Dividend Equity ETF SCHD

With AUM of $7.6 billion, this product offers exposure to 112 high dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. IBM occupies the eighth position in the basket with 4.2% of the portfolio. Consumer staples and information technology are the top two sectors with over 20% share each. The fund trades in solid volume of 994,000 shares a day and is one of the low cost choices in the dividend space, charging 7 bps in fees per year. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 5 Dividend Growth ETFs to Fight Trade & Inflation Fears).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>


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
 
International Business Machines Corporation (IBM): Free Stock Analysis Report
 
FT-NDQ TECH DIF (TDIV): ETF Research Reports
 
GUGG-DJIA DVD (DJD): ETF Research Reports
 
SCHWAB-US DV EQ (SCHD): ETF Research Reports
 
INNV-SHS NG PRT (KOIN): ETF Research Reports
 
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