IBM Beats Q2 Earnings on AI Growth: ETFs to Buy

After the closing bell on Jul 24, International Business Machines IBM reported strong second-quarter 2024 results. It beat estimates for earnings and revenues, citing rising customer demand for new AI projects. IBM shares spiked 4% in aftermarket hours.

Investors seeking to tap the strength could consider ETFs having the highest allocation to this tech giant. These funds are First Trust NASDAQ Technology Dividend Index Fund TDIV, FT Cboe Vest Technology Dividend Target Income ETF, FT Cboe Vest DJIA Dogs 10 Target Income ETF DOGG, Invesco Dow Jones Industrial Average Dividend ETF DJD and Morningstar Dividend Leaders Index Fund FDL.

IBM's second-quarter earnings per share came in at $2.43, surpassing the Zacks Consensus Estimate of $2.16 and improving from the year-ago earnings of $2.18. Revenues grew 2% year over year to $15.8 billion and edged past the consensus estimate of $15.6 billion.

Consulting revenues dipped 1% in the quarter, while software revenues grew 7% from the year-ago levels. IBM is capitalizing on the growing demand for AI integration. The company's book of business for generative AI has grown to more than $2 billion since the launch of watsonx one year ago.

IBM reaffirmed its full-year guidance for mid-single-digit revenue growth for 2024.

The 113-year-old company expects software revenues to grow at a high-single-digit percentage in 2024, above the previous forecast of the high end of mid-single-digit percentage. The higher forecast came on the back of higher AI-linked spending by clients looking to adopt the technology. However, IBM lowered its consulting revenue growth projections to low single-digit percentages for 2024 from 6%-8%.

ETFs in Focus

First Trust NASDAQ Technology Dividend Index Fund

First Trust NASDAQ Technology Dividend Index Fund provides exposure to dividend payers within the technology and telecommunication sector by tracking the Nasdaq Technology Dividend Index. It charges 50 bps in annual fees and holds about 87 securities in its basket. Of these firms, IBM takes the third spot, making up 8.5% of the assets.

First Trust NASDAQ Technology Dividend Index Fund has amassed $2.7 billion in its asset base while trading in a volume of around 91,000 shares per day. 

FT Cboe Vest Technology Dividend Target Income ETF

FT Cboe Vest Technology Dividend Target Income ETF is an actively managed fund that seeks to provide a target level of current income and capital appreciation by holding a portfolio of dividend-paying U.S. technology companies. The fund utilizes a call-writing option strategy on the Nasdaq 100 Index and/or the S&P 500 Index or related ETFs. It holds 87 securities in its basket, with IBM taking the third spot at 8.4% share.

FT Cboe Vest Technology Dividend Target Income ETF has accumulated $30.7 million in its asset base and trades in a volume of 9,000 shares per day on average. It charges 75 bps in annual fees.

FT Cboe Vest DJIA Dogs 10 Target Income ETF

FT Cboe Vest DJIA Dogs 10 Target Income ETF seeks to provide current income with a secondary objective of providing capital appreciation. It provides exposure to the "Dogs of the Dow" the 10 highest dividend-yielding stocks in the Dow Jones Industrial Average on an annual basis. DOGG holds 41 stocks in its basket, with IBM occupying the second position at 6% share.

FT Cboe Vest DJIA Dogs 10 Target Income ETF has accumulated $34.1 million in its asset base and trades in a volume of 11,000 shares. It charges 75 bps in fees and expenses. 

Invesco Dow Jones Industrial Average Dividend ETF

Invesco Dow Jones Industrial Average Dividend ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 29 stocks in its basket, with IBM occupying the eighth position, accounting for 4.7%.

Invesco Dow Jones Industrial Average Dividend ETF has managed assets worth $298.8 million while trading in a volume of 21,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold).

First Trust Morningstar Dividend Leaders Index Fund

First Trust Morningstar Dividend Leaders Index Fund offers exposure to stocks that have shown the highest dividend consistency and dividend sustainability by tracking the Morningstar Dividend Leaders Index. It holds 100 stocks in its basket, with IBM taking the seventh spot at 4.6% share.

With AUM of $4 billion, First Trust Morningstar Dividend Leaders Index Fund charges 45 bps in annual fees from investors and trades in a solid volume of about 449,000 shares a day. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

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