Thursday’s ETF To Watch: Telecom ETF (VOX)

by on January 26, 2012 | ETFs Mentioned:

As we dive further into earnings season, investors will do their best to focus on relatively strong U.S. data, as opposed to decisions by the Fed, the Greek debt crisis, and other factors hindering the recovery. On Tuesday, investors saw Apple (AAPL) crush market estimates with their quarterly earnings. The shares soared the most in three years as iPhone and iPad sales doubled that of last year’s holiday season. What’s more, Apple has now narrowly taken over Exxon Mobil (XOM) for the world’s most valuable company by market capitalization. While it is unclear how long the firm will remain in first place, Apple’s rally is certainly helping to prop up markets amid investor concerns [see also The Ten Commandments of Commodity Investing].

Today will follow suit with more bellwether earnings as AT&T (T) will be releasing their most recent quarter’s results. The telecom giant will look to make a statement as its largest competitor, Verizon Wireless, missed analyst estimates on Tuesday and saw its share price tumble. Investors will be especially curious to see how AT&T’s quarter turned out given the news that Apple sold a record number of iPhones last quarter. Though AT&T is no longer the exclusive iPhone provider, this will still account for a good chunk of their revenues and it could mean a strong quarter for the firm [see also How To Invest Like UBS In 2012 (Using Only ETFs)].

Analysts are calling for EPS of $0.43 with revenues just below the $32 billion mark. If all figures are met, this will represent a 1.5% growth in sales for all of 2011 with total revenues eclipsing the $125 billion line. Investors will note that T has either met or surpassed its last four earnings estimates, which bodes well for a good report today. The firm will report before market open so look for the stock to gap at opening depending on which way the report goes.

With this major announcement on tap, today’s ETF to watch will be the Telecom ETF (VOX) from Vanguard. This fund seeks to replicate a benchmark that consists of stocks of large, medium, and small U.S. companies in the telecommunication services sector. Top holdings include none other than AT&T (22.9%), along with Verizon, Sprint Nextel, and a number of other household names. This fund has been relatively flat over the past year, but with a dividend yield of 3.2%, that may be just fine for those utilizing this ETF for its income stream. As far as today’s trading is concerned, VOX will rely heavily on AT&T’s earnings and will likely move in line with the announcement [see also Three ETFs For Smart Phone Exposure].

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Disclosure: No positions at time of writing.