This earnings season has been solid with most companies
reporting earnings above expectations. In fact, to date, total
profits this earnings season are up 2.1% while revenues have
increased 1.9% from the year-ago period.
From a sector perspective, financials have been the star
performer while technology remains the biggest drag (read:
3 Bank ETFs Leading the Pack this Earnings
Further, investors turned their focus on riskier assets (i.e.
cyclical stocks) at the middle of second quarter, pushing down
the consumer staples and many other defensive sectors over the
past few months.
Consumer Earnings in Focus
However, one of the bellwethers -
Procter & Gamble (
- in this stressed space seems back on track after the return of
A.G. Lafley as CEO in May. This is evident in its latest earnings
release. The world's largest consumer-products maker surpassed
the Zacks Consensus Estimate on both earnings and revenues as it
has been working on a turnaround plan.
The company's earnings of 79 cents per share decreased 4% year
over year, but beat our estimate by 2 cents. Revenues rose 2% to
$20.7 billion and outpaced our estimate of $20.59 billion (read:
6 ETFs Beating the Market Over the Past Year
In fiscal 2013, earnings per share and revenue increased 5%
and 1%, respectively, from the prior year. These numbers are also
above their respective Zacks Consensus Estimates.
Further, Procter & Gamble has given an encouraging
guidance for fiscal 2014. The company expects earnings per share
to grow 5% to 7% on sales increase of 1% to 2%. Organic sales are
expected to climb 3% to 4% as well, suggesting a solid
Following the earnings beat, shares of PG climbed 2.4% in
early trading hours but closed a little off these highs, adding
about 1.7% on elevated volume.
This solid run was also felt in the ETF world, with consumer
3 Top Ranked Consumer ETFs to Buy Now
). Many of the key funds in this segment have a double-digit
allocation to the consumer product giant and gained in the day's
Since many smaller companies in the sector were buoyed by PG's
strength, they too had a good day, leading to smooth trading
overall for the segment. In particular, higher trading was seen
in the following three ETFs, as these have the biggest
allocations to Procter & Gamble (see more in the
iShares Dow Jones US Consumer Goods Sector ETF (
This ETF tracks the Dow Jones U.S. Consumer Goods Index,
giving investors exposure to the broad consumer staples space.
The fund holds about 120 stocks in its basket with AUM of $470
million while charging a slightly higher fee of 46 bps per year
Procter & Gamble occupies the top position in the basket
with 12.02% of assets while others hold less than 8.4% of assets.
This suggests that the performance of the fund is highly
dependent on PG's performance. However, the fund is widely
diversified across sectors as none of them make up for more than
20% of IYK.
The fund gained 1.36% on the day and is up 22.24% in the
year-to-date time frame. The product has a Zacks ETF Rank of 3 or
'Hold' with a 'Medium' risk outlook.
Consumer Staples Select Sector SPDR Fund (
The most popular consumer ETF on the market, XLP follows the
S&P Consumer Staples Select Sector Index, and has amassed
about $6.8 billion in its asset base. The fund charges 18 bps in
fees per year from investors (read:
Can the Consumer Staples ETF Go Higher?
In total, the fund holds about 42 securities in its basket. Of
these firms, PG takes the first spot, making up roughly 14.02% of
the assets. In terms of industrial exposure, the fund is skewed
towards food & staples retailing which makes up for
one-fourth share, closely followed by household products (20.96%)
and beverages (19.70%).
The fund returned over 19.5% so far this year and added 0.82%
on the day. XLP currently has a Zacks ETF Rank of 3 or 'Hold'
with a 'Low' risk outlook.
Vanguard Consumer Staples ETF (
This fund manages a $1.5 billion asset base and provides
exposure to a basket of 113 consumer stocks by tracking the MSCI
US Investable Market Consumer Staples 25/50 Index. The product
charges low fee of 14 bps per year from investors.
Again here, PG is the top firm with a 12.3% allocation. The
product is widely spread across household products, soft drinks,
packaged foods & meat, tobacco and hypermarkets & super
centers, as each makes up a double-digit allocation in the
VDC added 22.42% year-to-date and 0.93% on the day. The fund
has a Zacks ETF Rank of 3 or 'Hold' with a 'Low' risk
The stellar performance by PG signals that the consumer
staples market may be back on track again as most of the consumer
staples ETFs were up more than the overall market on the day.
However, valuations for the consumer staples sector looks
overpriced at current levels and could be vulnerable to the
rising interest rates environment, so make sure to pay close
attention to other important names in the space to see which way
the trend may head to close out the year (read:
3 Sector ETFs to Avoid as Interest Rates Rise
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ISHARS-US CN NC (IYK): ETF Research Reports
PROCTER & GAMBL (PG): Free Stock Analysis
VIPERS-CONS STA (VDC): ETF Research Reports
SPDR-CONS STPL (XLP): ETF Research Reports
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