Earnings for the technology sector seem to be shaping up well
this season, propelled by the semiconductors. Total earnings for
69.1% of the sector's total market capitalization that have
reported so far are up 11.8% on 6.9% revenue growth. This
represents the best growth in recent quarters.
About 63% of the earnings growth has come from semiconductor
electronics with 100% earnings beat, followed by 10.6% growth in
miscellaneous technology. In addition, the semiconductor corner of
the broad technology space has become the darling of investors this
year and most of the stocks in the space are flying high thanks to
the Internet and social media meltdown as well as encouraging
In particular, higher-than-expected earnings from some well-known
names such as Intel (
), Micron Technology (
), Broadcom (
) and Texas Instruments (
) have fueled optimism in the semiconductor space. Further, the
industry has a solid Zacks Industry Rank at the time of writing,
suggesting smooth trading for the space in the coming months (read:
Enjoy the Semiconductor Stock Rally with this Top
Semiconductor Earnings in Focus
, the world's largest chipmaker, has been the major gainer in the
industry as the stock climbed nearly 8% since its earnings
announcement on July 15 after the closing bell and hit a 12-year
high of $34.83 last week. The company topped the Zacks Consensus
Estimate by 3 cents on earnings and $209 million on revenues thanks
to strong demand in its core server and PC markets. Further, the
company projects revenues in the range of $13.9--$$14.9 billion, up
4.1% sequentially and 6.8% year over year.
Shares of the memory chipmaker,
, rose over 8% since it reported third quarter fiscal 2014 earnings
on June 23. This is because earnings per share of 79 cents and
revenues of $3.98 billion comfortably beat the Zacks Consensus
Estimate of 71 cents per share and revenue estimate of $3.88
billion. Additionally, the company issued fourth quarter revenue
guidance of $4.0-4.2 billion.
also surprised the market in its latest earnings release on July 22
after the bell with its earnings per share of 65 cents on $2.04
billion in revenues that strongly outpaced our earnings estimate of
42 cents and revenue estimate of $2.05 billion. BRCM shares reached
a new 52-week high of $40.74 on solid results but fell over 1% post
earnings to date (read:
Broadcom A Rising Star: 2 ETFs to Pick
reported earnings of 62 cents surpassing our estimate by 3 cents.
Revenues of $3.29 billion were also above the Zacks Consensus
Estimate of $3.26. Additionally, the company provided an upbeat
guidance for the third quarter. Earnings per share are expected in
the range of 66-76 cents while revenues will likely be between
$3.31 billion and $3.59 billion. Despite the strong results and
encouraging outlook, TXN shares have lost about 5% to date post its
earnings announcement on July 21.
ETFs in Focus
The impressive performances and bright industry outlook put
semiconductor ETFs in focus for the next few days. Investors
seeking to ride out the surging space in a diversified way could
consider the following three ETFs.
iShares PHLX Semiconductor ETF (
This ETF follows the PHLX Semiconductor Sector Index and offers
exposure to 31 domestic firms. It is highly concentrated on the top
five firms with heavy allocations to INTC, MU and TXN that make up
for a combined one-fourth share. Further, about two-thirds of the
portfolio is dominated by large cap stocks while mid cap takes the
remainder with just 4% going to small caps.
The fund has amassed $498.6 million in its asset base and trades in
average volume of roughly 162,000 shares a day. The product charges
47 bps in fees a year from investors and lost over 4% last week
all the Technology ETFs here
Market Vectors Semiconductor ETF (
This is easily the most popular and liquid ETF in the semiconductor
space with AUM of about $402 million and average daily volume of
more than 1.6 million shares. The fund provides exposure to 26
securities by tracking the Market Vectors US Listed Semiconductor
25 Index. Of these, the two firms - Intel and Taiwan Semiconductor
) - dominate the fund's return with combined 36.3% of total assets.
From a market cap look, the product focuses more on large cap
stocks, as these account for three-fourth of the portfolio. While
U.S. firms dominate the fund's holdings at 70.8% of assets, Taiwan
(16.2%), the Netherlands (8.7%) and United Kingdom (4.4%) take the
remainder portion. Expense ratio is the lowest at 35 bps when
compared to other semiconductor products in the space. SMH is down
2.7% in the past five trading sessions.
SPDR S&P Semiconductor ETF (
This fund tracks the S&P Semiconductor Select Industry Index,
holding 50 stocks in its portfolio. It is widely spread across each
security as none of these allocates more than 2.8% of the assets.
The product has a definite tilt toward small cap stocks at 59%,
followed by 27% in mid caps and 14% in large caps.
The fund is less popular and illiquid with AUM of $164.3 million
and average daily volume of less than 86,000 shares. It charges 35
bps in fees per year and lost nearly 5.7% last week (read:
2 Hot Summer ETFs Surging to #1 Ranks
Though these products were on a wild ride last week, these could
make for a compelling buying opportunity for investors seeking to
tap the beaten down prices in the wake of an earnings beat,
improving PC market, and rising global industry sales. This is
especially true, as the trio returned nearly 16% in the
year-to-date time frame, crushing the broad tech fund (
) and broad market fund (
) by wide margins.
Further, the above-mentioned funds have a top Zacks ETF Rank of
1 or 'Strong Buy' suggesting their outperformance in the coming
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ISHARS-PHLX SEM (SOXX): ETF Research Reports
MKT VEC-SEMICON (SMH): ETF Research Reports
SPDR-SP SEMICON (XSD): ETF Research Reports
INTEL CORP (INTC): Free Stock Analysis Report
MICRON TECH (MU): Free Stock Analysis Report
BROADCOM CORP-A (BRCM): Free Stock Analysis
TEXAS INSTRS (TXN): Free Stock Analysis Report
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