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Slew of Earnings Beat Fail to Cheer Semiconductor ETFs

Sweta Killa

After an astounding performance in October–December 2015 period, the technology sector lost its luster thanks to global headwinds and a spate of disappointing earnings reports. Total earnings for 89.5% of the sector’s total market capitalization that have reported so far are up just 0.1% on 2.3% revenue growth.


However, the beat ratios are impressive with 76.1% of the companies beating on earnings and 60.9% trumping revenue estimates. However, some of them issued a disappointing revenue outlook.


Let’s dig into the individual performances:


Semiconductor Earnings in Focus


Intel (INTC), the world’s largest chipmaker, reported solid Q4 results surpassing our earnings estimates by 11 cents and revenue estimates by $0.1 billion. On a year-over-year basis, earnings per share were flat while revenues grew 1%. For Q1, Intel expects revenues in the range of $13.6–$14.6 billion – the midpoint of which was well below the Zacks Consensus Estimate of $13.76 billion at the time of the earnings release. For fiscal 2016, revenues are expected to grow in mid-to-high single digits (read: Intel Tops Q4; Shares Fall: Should You Buy Its ETFs?).

 

Texas Instruments (TXN) topped our earnings estimate by a couple of cents but missed on revenues by $140 million. For the ongoing first quarter, the company expects revenues in the range of $2.85–$3.09 billion and earnings per share of 57–67 cents. The Zacks Consensus Estimate for the first quarter at the time of issuing the guidance was $3.13 billion for revenue and 64 cents for earnings.

 

First-quarter fiscal 2016 earnings at Qualcomm (QCOM) came in at 85 cents per share, beating our estimate by 7 cents. Revenues of $5.77 billion were ahead of our estimate of $5.69 billion. The company guided revenues of $4.9–$5.7 billion and earnings per share of 77–87 cents for the second quarter of fiscal 2016. The Zacks Consensus Estimate for the fiscal second quarter at the time of issuing the guidance was $5.66 billion for revenue and 78 cents for earnings.


Xilinx Inc. (XLNX) reported adjusted earnings per share of 49 cents for the third quarter of fiscal 2016, in line with the Zacks Consensus Estimate while revenues of $566 million edged past our estimate of $555 million. The company provided an encouraging fiscal fourth-quarter outlook wherein it expects revenues to be flat sequentially at $566 million, which was very close to the Zacks Consensus Estimate $568 million at the time of issuing the guidance.


ETFs in Focus


The series of earnings beat was unable to energize the semiconductor ETFs amid eroding investor confidence in the broad technology sector. Nevertheless, the beaten down prices could create an attractive entry opportunity for bargain hunters as the four semiconductor ETFs have a Zacks ETF Rank of 1 (Strong Buy) or 3 (Hold). These funds are down nearly 7% over the past one month. Below, we have highlighted these in detail (read: Will Semiconductor ETFs See a Brighter 2016?).


iShares PHLX Semiconductor ETF (SOXX)


This ETF follows the PHLX Semiconductor Sector Index and offers exposure to 30 domestic firms. The in-focus four firms are among the top 10 holdings accounting for a combined 28.3% share in the basket. About 55% of the portfolio is dominated by large cap stocks while mid caps take the remainder, with just 7% going to small caps. The fund has amassed $409.3 million in its asset base and trades in solid average volume of roughly 592,000 shares a day. The product charges 48 bps in fees a year from investors and has a Zacks ETF Rank of 1.


SPDR S&P Semiconductor ETF (XSD)


This fund tracks the S&P Semiconductor Select Industry Index, holding 41 stocks in its portfolio. It is widely spread across a number of securities as none of these allocates more than 3.9% of the assets. The product has a definite tilt toward small cap stocks at 69% while the rest is split between the other two market cap levels. The fund is less popular with AUM of $177.8 million and average daily volume of around 180,000 shares. It charges 35 bps in fees per year and has a Zacks ETF Rank of 1 (see: all the Technology ETFs here).

 

Market Vectors Semiconductor ETF (SMH)


This fund provides exposure to 26 securities by tracking the Market Vectors US Listed Semiconductor 25 Index. Of these, four firms – INTC, QCOM, TXN and XLNX – occupy the first, third, fifth and eleventh spots, respectively, collectively accounting for more than one-third of the portfolio. From a market cap look, the product focuses on large cap stocks, which account for about 75% of the portfolio. The product has managed assets worth $166.4 million and charges 35 bps in annual fees and expenses. It is heavily traded with volume of around 4 million shares per day and has a Zacks ETF Rank of 3.


PowerShares Dynamic Semiconductors Fund (PSI)


This fund tracks the Dynamic Semiconductor Intellidex Index, holding 28 securities with TXN and INTC taking the top two positions in the basket with nearly 6% each. XLNX is also among the top 10 holdings making up for 3.60% share. Here again, the ETF is skewed toward small caps at 52% while mid caps and large caps account for 26% and 22%, respectively. The product, with AUM of $46.4 million is often overlooked by investors and hence sees a lower average daily volume of 24,000 shares. Expense ratio comes in at 0.63%. PSI has a Zacks ETF Rank of 1 (read: 2 ETFs That Surged to Rank #1 Braving All Odds).

 










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INTEL CORP (INTC): Free Stock Analysis Report
 
TEXAS INSTRS (TXN): Free Stock Analysis Report
 
QUALCOMM INC (QCOM): Free Stock Analysis Report
 
XILINX INC (XLNX): Free Stock Analysis Report
 
ISHARS-PHLX SEM (SOXX): ETF Research Reports
 
SPDR-SP SEMICON (XSD): ETF Research Reports
 
MKT VEC-SEMICON (SMH): ETF Research Reports
 
PWRSH-DYN SEMI (PSI): ETF Research Reports
 
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