Tech bellwether Oracle (NYSE:ORCL) reported lackluster fourth-quarter fiscal 2015 results (ending in May) after the closing bell on Wednesday. The company missed the Zacks Consensus Estimate for earnings and revenues due to negative currency translations and sagging traditional software sales.
Oracle Q4 Earnings in Focus
Earnings per share came in at 74 cents, lagging the Zacks Consensus Estimate by 8 cents. Revenues declined 5% year over year at $10.7 billion and were well below our $10.95 billion estimate.
While the company's shift to the Web-based cloud computing business is paying off, the gains are unlikely to make up for the declines in the software business. Additionally, a strong dollar remain as a headwind to the company's performance. Excluding the impact of unfavorable currency rates, revenues would have risen 3%.
Cloud software platform sales climbed 29% from the year-ago quarter and accounted for 4% of total revenue. Oracle will continue to benefit from the new generation of cloud computing and Big Data and steal market share from Salesforce.com Inc. (NYSE:CRM), the only major software company competing in the cloud segment.
For the fiscal first quarter, the world's largest database software maker expects revenues to grow in 5-8% range in constant currency and earnings per share between 56 cents and 90 cents. The midpoint of the earnings guidance is well above the Zacks Consensus Estimate of 58 cents.
Based on earnings and revenue miss, Oracle shares tumbled as much as 7.1% in after-hours trading. The sluggish trading is expected to continue in the days ahead given that the stock has a Zacks Rank #4 (Sell) and a poor Zacks Industry Rank in the bottom 34% at the time of writing.
ETFs in Focus
Given this, ETFs with the highest allocation to this software giant will be in focus in the days ahead. Investors should closely monitor the movement in these funds and avoid these if the stock drags them down:
iShares S&P North American Technology-Software Index Fund (BATS:IGV)
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 57 securities with Oracle taking the third spot at 8.47% of total assets. It is quite popular with AUM of over $1.2 billion while volume is moderate as it exchanges nearly 99,000 shares a day.
The product charges 47 bps in annual fees and has gained about 10.4% so far this year. IGV has a Zacks ETF Rank of 3 or 'Hold' rating with a High risk outlook.
First Trust NASDAQ Technology Dividend Index Fund (NASDAQ:TDIV)
This fund provides exposure to the dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $692.7 million in its asset base while trades in volume of around 171,000 shares per day. The ETF charges 50 bps in annual fees.
In total, the fund holds about 110 securities in its basket. Of these firms, ORCL takes the sixth position, making up roughly 4.3% of the assets. In terms of industrial exposure, the fund allocates one-fifth portion in semiconductor and semiconductor equipment, followed by technology hardware, storage & peripherals (16.6%) and software (16.5%). The fund is relatively flat so far this year.
iShares Dow Jones U.S. Technology ETF (NYSEARCA:IYW)
This ETF tracks the Dow Jones US Technology Index, giving investors exposure to the broad technology space. The fund holds 139 stocks in its basket with AUM of $3.1 billion while charging 43 bps in fees and expenses. Volume is moderate as it exchanges nearly 531,000 shares in hand a day.
Oracle takes the ninth spot in the basket with nearly 4% of assets. The product is heavily skewed toward the software and services segments, as these make up for just less than half of the portfolio. Tech hardware and equipment, and semiconductors and semiconductor equipment take the remaining portion in the basket. The fund has added nearly 4% in the year-to-date time frame and has a Zacks ETF Rank of 1 or 'Strong Buy' rating with a Medium risk outlook.