Semiconductor stocks have been on a tear this year on improved overseas demand and innovative technologies. New areas such as autonomous cars, cloud computing, gaming, wearables, VR headsets, drones, virtual reality devices, Internet of Things (IoT) and artificial intelligence are fueling growth in the sector, offsetting struggling traditional businesses like PCs and smartphones.
In particular, iShares PHLX Semiconductor ETF (SOXX – Free Report), VanEck Vectors Semiconductor ETF (SMH – Free Report) and PowerShares Dynamic Semiconductors Fund (PSI – Free Report) have been hitting multiple highs lately and are currently leading the tech surge. These funds have been up 9.7%, 10%, and 12.1%, respectively, in a month and have crushed the broad technology fund (XLK – Free Report) by a wide margin. XLK has gained 5.1% in the same time frame.
This trend is likely to continue this reporting cycle given that most of the chipmakers are poised to surprise again this quarter. Let’s delve into the earnings picture of major chipmakers like Intel (INTC – Free Report) , Texas Instruments (TXN – Free Report) , NVIDIA (NVDA – Free Report) and Applied Materials (AMAT – Free Report) that have a higher allocation to these ETFs and the power to move the funds up or down as Q3 earnings unfold. SOXX has the largest concentration in the five firms with a combined share of 29.5%, followed by 25.1% for SMH and 20.3% for PSI.
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while a Zacks Rank #4 or 5 (Sell-rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
What’s in Store?
Intel is slated to release earnings after market close on Oct 26. It has a Zacks Rank #1 and an Earnings ESP of +0.06%, indicating higher chances of beating estimates this quarter. The stock has seen a positive earnings estimate revision of six cents over the past 90 days for the to-be-reported quarter and delivered a positive earnings surprise of 5.59% on average over the last four quarters. Intel has a VGM Style Score of B.
