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Wal-Mart Blockbuster Q2 Earnings Pushes Consumer ETFs Higher


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Wal-Mart WMT reported blockbuster second-quarter fiscal 2019 results. The mega retailer topped the estimates on both the top and bottom line and recorded the strongest growth in more than a decade in sales at established stores. Additionally, it raised the full fiscal outlook, spreading huge optimism into the company's growth prospects.    

Earnings in Focus

Earnings per share came in at $1.29, beating the Zacks Consensus Estimate by 8 cents and improving 19.4% from the year-ago earnings. Revenues increased 3.8% year over year to $128 billion and were ahead of the consensus mark of $125.64 billion. U.S. same-store sales grew at the fastest pace in a decade, climbing 4.5% in the quarter buoyed by robust sales in its grocery and apparel departments.

Online sales jumped 40%, indicating that e-commerce upgrades like a revamped website, a new page for baby items, a hot category, and a 3-D feature for online home shopping as well as expanding grocery delivery options are paying off. Wal-Mart expects online sales continue to grow 40% for the fiscal year (read: U.S. Retail Sales Steady in July: ETFs & Stocks to Play ).

Based on strong momentum, the brick-and-mortar retailer raised its fiscal year outlook, excluding any impact from its acquisition of Indian e-commerce giant Flipkart, which is still in the process of closing.  Revenues are expected to grow 2% compared with the previous guidance of 1.5-2% growth, while U.S. same-store sales will increase 3% compared with the previous expectation of 2%. Wal-Mart lifted earnings per share guidance in the range of $4.90-$5.05 from $4.75-$5.00.

Market Impact

The healthy results pushed shares of WMT 9.3% on the day to six-month high on elevated and crushed its average daily volume figures, as more than 42.6 million shares moved hands compared to just 7.7 million on average. Though Wal-Mart belongs to a bottom-ranked Zacks industry ( bottom 2% ), it currently carries a Zacks Rank #3 (Hold) and has a solid VGM Score of B.

Consequently, ETFs having the highest allocation to the world's largest brick-and-mortar retailer also surged on the day. Below, we have highlighted five of them:

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, WMT occupies the third position in the basket with 8.6% share. The ETF has a certain tilt toward specialty retail, which accounts for 31.1% of the portfolio while food & staples retailing (24.8%), Internet direct marketing (23.4%), and multiline (10.8%) round off the next three spots. The product has amassed $92.1 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 10,000 shares per day. RTH has gained 1.3% post WMT results and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Profit from Retail Disruption with These ETFs ).

Consumer Staples Select Sector SPDR Fund XLP

This is the most-popular consumer staples ETF with AUM of $9.3 billion and follows the Consumer Staples Select Sector Index. The fund charges 13 bps in fees per year from investors and trades in heavy volume of nearly 14.2 million shares a day. In total, the fund holds about 32 securities in its basket with Wal-Mart taking the fourth spot at 7.9%. From a sector look, beverages takes the largest share at 26.2% while household products, food and staples retailing, food products and tobacco account for a double-digit allocation each. XLP gained 1.5% on the day but has a Zacks ETF Rank #5 (Strong Sell) with a Medium risk outlook.

Fidelity MSCI Consumer Staples Index ETF FSTA

This fund tracks the MSCI USA IMI Consumer Staples Index, holding 90 stocks in its basket. Out of these, WMT takes the fourth spot with 7.4% share. The ETF is widely diversified across beverages, food and staples retailing, household products, food products, and tobacco. It has amassed $324.8 million in its asset base, while trading in a moderate volume of around 77,000 shares a day on average. It charges 8 bps in annual fees from investors and has added 1.5% following Wal-Mart results. The product has a Zacks ETF Rank #5 with a Medium risk outlook (read: Consumer Staples ETFs Riding High on Trade War Fears ).

Vanguard Consumer Staples ETF VDC

This fund manages a $4 billion asset base and has exposure to a basket of 94 consumer stocks by tracking the MSCI US Investable Market Consumer Staples 25/50 Index. It charges a fee of 10 bps per year and trades in a good volume of around 134,000 shares. Here, WMT occupies the fifth position in the basket with 7.1% allocation. The product is widely spread across soft drinks, household products, packaged foods & meat, hypermarkets & super centers, and tobacco that make up for a double-digit allocation each. The fund is up 1.4% on the day and has a Zacks ETF Rank #5 with a Medium risk outlook.

John Hancock Multifactor Consumer Staples ETF JHMS

This product also targets the consumer staples sector emphasizing factors (smaller cap, lower relative price, and higher profitability) that academic research has linked to higher expected returns by tracking the John Hancock Dimensional Consumer Staples Index. Holding 52 stocks in its basket, WMT takes the third spot at 6% share. Food products takes the largest share in terms of industrial exposure with 29% while food and staples retailing, beverages, and household products round off the next three spots. The fund has accumulated $28.6 million in AUM and trades in a paltry volume of under 7,000 shares. It has a Zacks ETF Rank #5 (see: all Consumer Staples ETFs here ).

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SPDR-CONS STPL (XLP): ETF Research Reports

VANECK-RETAIL (RTH): ETF Research Reports

VIPERS-CONS STA (VDC): ETF Research Reports

FID-STAPLES (FSTA): ETF Research Reports

Walmart Inc. (WMT): Free Stock Analysis Report

JH-M-F CONS STP (JHMS): ETF Research Reports

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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 , Earnings , ETFs
Referenced Symbols: XLP , RTH , VDC , FSTA , WMT



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