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Semiconductor ETFs Riding High on Solid Earnings

Sweta Killa

Semiconductors have been shining and are leading the broader technology sector lately, thanks to renewed trade optimism and solid earnings. In particular, a spate of better-than-expected reports from well-known players like Texas Instruments TXN, Lam Research Corporation LRCX, Intel INTC and Qualcomm QCOM instilled confidence in the sector.

Let’s take a look into the individual performances:

Semiconductor Earnings in Focus

Texas Instruments reported mixed Q3 results, topping the Zacks Consensus Estimate by eight cents while missing revenue estimate by $39 million. For the ongoing fourth quarter, the company expects revenues in the range of $3.07–$3.33 billion and earnings per share of 91 cents–$1.09. The Zacks Consensus Estimate of $3.59 billion for revenues and $1.28 for earnings at the time of earnings release is lower than the midpoint of the respective guidance range.

Lam Research also topped earnings estimates in first-quarter fiscal 2020 while revenues came in line. Earnings per share of $3.18 surpassed the Zacks Consensus Estimate by 18 cents. Revenues totaled $2.17 billion. For second-quarter fiscal 2020, the company expects revenues in the range of $2.5 billion (+/- $150 million) and earnings per share of $3.80 (+/- 20 cents). The Zacks Consensus Estimate at the time of earnings release was pegged at $2.19 billion for revenues and $3.16 for earnings (read: Time to Buy the Dip in Semiconductor ETFs?).

Intel, the world’s largest chipmaker, beat earnings and revenue estimates by 18 cents and $1.1 billion, respectively. Intel expects revenues of around $19.2 billion and earnings per share of $1.24 for the fourth quarter of 2019. This is above the Zacks Consensus Estimate of $18.83 billion for revenues and $1.20 for earnings per share at the time of the earnings release. For 2019, the company raised its revenue guidance from $69.5 billion to $71 billion, slightly above the current Zacks Consensus Estimate of $69.41 billion. The earnings per share guidance has been revised upward to $4.60 from $4.40. The Zacks Consensus Estimate is pegged at $4.38.

At Qualcomm, earnings per share of 78 cents for fourth-quarter fiscal 2019 surpassed the consensus estimate of 71 cents while revenues of $4.8 billion edged past the estimate of $4.7 billion. The company guided revenues of $4.2–$5.2 billion and earnings per share of 80-90 cents for the first quarter of fiscal 2020.

ETFs in Focus

Impressive results of these chipmakers have pushed semiconductor ETFs higher over the past month. Investors seeking to make the most of the surging space in a diversified way could consider the following ETFs (see: all the Technology ETFs here).

iShares PHLX Semiconductor ETF SOXX

This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 firms. The in-focus four firms are among the top six holdings accounting for a combined 27.7% share in the basket. The fund has amassed $2.1 billion in its asset base and trades in solid average volume of around 659,000 shares a day. It charges 46 bps in fees a year from investors and has gained 11.1% in the past month. It has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

VanEck Vectors Semiconductor ETF SMH

This fund provides exposure to 25 securities by tracking the MVIS US Listed Semiconductor 25 Index. Of these, the in-focus four firms collectively make up for 27% share. The product has managed assets worth $1.4 billion and charges 35 bps in annual fees and expenses. It is heavily traded with a volume of around 6.1 million shares per day and has gained 11% in the same time frame. The fund has a Zacks ETF Rank #2 with a High risk outlook (read: 10 Top-Ranked ETFs Beating S&P 500 This Year).

First Trust Nasdaq Semiconductor ETF FTXL

This fund offers exposure to the most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. Holding 30 stocks in its basket, the in-focus firms collectively make up for 25.9% of assets. FTXL has accumulated $36.7 million in AUM. Average trading volume is light at around 15,000 shares and expense ratio is 0.60%. FTXL is up 11.7% over the past month and has a Zacks ETF Rank #3 (Hold).

PowerShares Dynamic Semiconductors Fund PSI

This fund tracks the Dynamic Semiconductor Intellidex Index, holding 30 securities in its basket. The in-focus firms collectively make up for 17.9% of the total assets. The product has AUM of $194.8 million and sees moderate average daily volume of 38,000 shares. Expense ratio is 0.58%. PSI has gained 9.6% in the same time frame and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.

SPDR S&P Semiconductor ETF XSD

This fund tracks the S&P Semiconductor Select Industry Index, holding 35 stocks in its portfolio with the in-focus firms making up for nearly 3% share each. The fund is less popular with AUM of $407.4 million and average daily volume of about 116,000 shares. It charges 35 bps in fees per year and has added 10.8% over the past month. The product has a Zacks ETF Rank #2 with a High risk outlook.

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