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A Look at IBM ETFs Ahead of Q2 Earnings

Sweta Killa

International Business Machines IBM is scheduled to report second-quarter 2019 results on Jul 17 after market close. Being the world’s largest computer-services provider, it is worth taking a look at its fundamentals ahead of results.

IBM has been on a downtrend over the past three months, losing 1.2%. However, it has outperformed the industry, which declined 1.7% in the said time frame. The negative trend might reverse if IBM beats earnings estimates.



Inside Our Methodology

IBM has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%. According to our surprise prediction methodology, the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 and a positive Earnings ESP increases the odds of an earnings beat. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided going into an earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The stock has seen no earnings estimate revision for the second quarter over the past 30 days. Its earnings track record is impressive, with the average four-quarter positive earnings surprise being 1.33%. The stock boasts a solid Value Score of A but belongs to a bottom-ranked Zacks industry (bottom 34%). However, the Zacks Consensus Estimate indicates modest earnings decline of 0.65% from the year-ago quarter. IBM projects year-over-year revenue decline of 4.4% (read: Dow ETF Appears Strong Ahead of Q2 Earnings).

The Zacks Consensus Estimate for average target price is $153.40 with 36% of the analysts having a Strong Buy or a Buy rating and 57% having a Hold rating ahead of earnings. This represents nearly 7% upside from the current price.

What to Watch?

Though revenues are expected to decline in the second quarter, strategic areas like cloud computing, security software, data analytics and artificial intelligence are likely to drive revenue growth this year. Ongoing growth in strategic areas will help IBM return to organic growth this year.

For 2019, the world’s largest computer-services provider expects full-year earnings of “at least $13.90” a share.

ETFs in Focus

Given this, ETFs having the highest allocation to this this tech giant will be in focus. These funds could be potential movers if IBM surprises the market:

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 $1 billion in its asset base while trading in volume of around 107,000 shares per day. It charges 50 bps in annual fees and holds about 93 securities in its basket. Of these firms, IBM takes the third spot, making up roughly 8% of the assets.

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 its basket, with IBM occupying the top position with 6.1% allocation. DJD has been able to manage assets worth $64.4 million, while trading in volume of 44,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read: 4 Reasons That Led Dow Jones to 27,000: ETFs in Focus).

WBI Power Factor High Dividend ETF WBIY

This ETF offers exposure to quality stocks that have the highest dividend yield with a deep value bias and multi-factor fundamental analysis. It follows the Solactive Power Factor High Dividend Index, holding 51 stocks in the basket with IBM taking the third spot at 5%. The product has amassed $103.3 million in its asset base and trades in lower volume of 33,000 shares a day on average. It charges 70 bps in annual fees.

Schwab U.S. Dividend Equity ETF SCHD

With AUM of $9.7 billion, this product offers exposure to 106 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 4.3% share. The fund trades in solid volume of 860,000 shares a day and is one of the low cost choices in the dividend space, charging 6 bps in fees per year. It has a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 Dividend ETFs for Safety and Higher Yields).

Tortoise Cloud Infrastructure Fund TCLD

This ETF offers exposure to companies that have the potential to benefit from the expected growing investments, rapid adoption and fast paced innovation of the cloud industry by tracking the Tortoise Global Cloud Infrastructure Index. It holds 45 securities in its basket with IBM taking the fifth spot at 4.5% share. TCLD has been able to gather $4.2 million in its asset base since its debut in January and sees lower volume of nearly 1,000 shares. It charges 40 bps in annual fees.

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