Pepsi, Procter & Gamble Earnings Lift Consumer ETFs

By (Tom Lydon),

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Pepsi ( PEP ) and Procter & Gamble ( PG ) shares rose after the consumer giants reported quarterly results, lifting sector exchange traded funds that count the stocks as top holdings.

At the end of the first quarter, Procter & Gamble was the largest holding in Vanguard Consumer Staples ETF (NYSEArca: VDC) at 12.4%. Pepsi was number five in the ETF at 7%.

Pepsi shares were up nearly 3% in afternoon trading Thursday.

Pepsi "delivered quite solid results in the first quarter, and if it can sustain its momentum over the next few quarters, we think our investment thesis-that the multiple gap with Coca-Cola ( KO ) should close-may soon play out," said Morningstar's Philip Gorham in a report on the earnings.

"Pepsi appears on track to meet our estimate of mid- to high-single-digit earnings growth in 2011, and we are maintaining our $76 fair value estimate and long-term outlook," he added. "Trading at 15 times 2011 earnings, Pepsi is an undervalued stock in an industry that could provide a safe haven if investors turn defensive over the next few months, in our opinion."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing ETFs
Referenced Stocks: KO , PEP , PG

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