Oracle Hits Decade High on Q2 Earnings Beat: 3 ETFs in Focus - ETF News And Commentary

Tech bellwether Oracle (

) cheered investors with stronger-than-expected second-quarter fiscal 2015 results (ending in November). The company beat our earnings and revenue estimates for the first time in a year, after missing three quarters in a row. This is because the company's shift to the Web-based cloud computing business is paying off.

Earnings per share came in at 69 cents (excluding stock-based compensation), topping the Zacks Consensus Estimate by 4 cents. Revenues rose 3.5% year over year to $9.6 billion, outpacing our estimate of $9.53 billion and coming in near the higher end of the company's own guidance range of 0–4%. The robust performance was mainly driven by a 45% year-over-year surge in cloud revenue to $516 million (read:

).

Though cloud software sales are still just 5% of total revenue, Oracle will continue to benefit from the ongoing transition to the new generation of cloud computing and Big Data and steal market share from the Salesforce.com Inc. (

), the only major software company competing in the cloud segment. Notably, Oracle is on track to sell more than $1 billion of new cloud subscriptions in full fiscal 2015.  

For the fiscal third quarter, the world's largest database software maker expects revenues to grow in the range of 4–8%. It also expects earnings per share in the range of 69–74 cents; the midpoint being above the Zacks Consensus Estimate of 69 cents. Oracle also pointed out in its conference call that high volatility in foreign exchange rates could hurt revenues by 4% and earnings per share by 4 cents in the ongoing quarter.

Based on strong results, Oracle soared more than 10% to the highest price of $45.37 not seen in more than a decade. This marked the biggest one-day jump since October 2008, pushing the company's valuation to nearly $201 billion. Oracle is now the fourth largest Silicon Valley tech company beating Intel (

) in terms of market cap but behind Apple (

), Google (

) and Facebook (

) (read:

).

The stock currently has a Zacks Rank #4 (Sell), suggesting that currency is the major headwind to the company's future growth. However, Oracle has a solid Zacks Industry Rank in the top 41% at the time of writing.

The smooth trading in the stock also led to the rally in the ETF world, especially among the funds with the largest allocation to this software giant. As a result, we have highlighted three ETFs that investors may want to take a closer look at and will be in focus in the coming days.

This ETF provides exposure to the software segment of the broader U.S. technology space by tracking the S&P North American Technology-Software Index. The fund holds a basket of 56 securities with Oracle taking the second spot at 8.85% of total assets.  

The fund is quite popular with AUM of over $1.1 billion while volume is moderate as it exchanges nearly 120,000 shares a day. The product charges 47 bps in fees and expenses and surged 3.5% following Oracle results. IGV has a Zacks ETF Rank of 2 or ‘Buy' rating with a High risk outlook (see:

).

This product follows the Dynamic Software Intellidex Index, holding 30 securities in its basket. Out of these, Oracle is the third firm accounting for 4.97% share. The fund is less popular and illiquid in the broad tech space with AUM of $49.2 million and average daily volume of under 4,000 shares. Expense ratio came in at 0.63%.

The fund climbed nearly 4% on solid Oracle results and has a Zacks ETF Rank of 3 or ‘Hold' rating with a High risk outlook.

This ETF tracks the NASDAQ US Buyback Achievers Index, which comprises companies that have repurchased 5% or more of their common stock in the trailing 12 months. Holding 170 stocks in its basket, Oracle occupies the second position at 5.26% share (read:

).

In terms of sectors, consumer discretionary makes up for one-third of the portfolio while information technology, health care, and financials round off the top three with double-digit exposure. PKW is one of the popular funds in the niche space managing an asset base of $2.6 billion and trading in good volumes of 383,000 shares a day. It charges a bit higher annual fee of 68 bps and added 2.4% on the day.  

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