Consumer Staples ETFs To Watch On Philip Morris' Q3 Results

The tobacco giant, Philip Morris International, Inc. (NYSE:PM) came up with a better-than-expected third quarter earnings per share and posted a year-on-year gain in quarterly revenues. However, concerns regarding the weak third-quarter performance in the tobacco category dragged shares of the company into negative territory yesterday. Shares of Philip Morris saw a decline of 0.6% following its third quarter earnings release.

Q3 Results in Focus

The company’s third quarter adjusted earnings per share of $1.25 came ahead of the Zacks Consensus Estimate by a couple of cents and gained 1% from the year-ago quarter. Earnings rose 4% from the year-ago period when considered excluding an unfavorable currency impact of 4 cents. Though third quarter net revenue of $7.0 billion was in-line with the Zacks Consensus Estimate, it increased 1% year on year. Robust sales in the Asia and European Union segment primarily boosted the company’s results during the quarter (read: Is a Consumer Staples ETF Rebound Around the Corner?).

Meanwhile, operating income in the quarter increased 1% year on year to $3.1 billion. However, a decline in tobacco sales had a negative impact on Philip Morris’s performance during the quarter. The company reported that cigarette shipment volumes registered a decline of 5.4% from the year-ago quarter to 2.1 billion units during the third quarter. Apart from the European Union, the company saw significant year-over-year decline in shipments in all other major market segments. Shipments volume declined 5.4%, 9% and 8% in Eastern Europe, the Middle East & Africa (EMEA), Asia, and Latin America and Canada, respectively.

Separately, the company forecast GAAP-earnings for 2016 between $4.53 and $4.58 per share, higher than last year’s figure of $4.42. Also, the tobacco behemoth declared a hike in quarterly dividend by 2% to an annualized amount of $4.16 per share (read: A Guide to Consumer Staples ETF Investing).

ETFs to Watch

Though shares of the company declined yesterday, its price movement in the near future will depend on how the company performs in the upcoming quarter. The encouraging outlook it provided somehow indicates that the company is poised to finish this year on a positive note. Hence, it can be said that the stock will remain on investors’ radar in the days ahead along with the ETFs that have significant exposure to this company (see all Consumer Staples ETFshere).

Consumer Staples Select Sector SPDR ETF (NYSE:XLP) XLP

This fund is the most popular product within the consumer staples equities space, having an asset base of $8.9 billion. The fund tracks the S&P Consumer Staples Select Sector Index and holds a small basket of 39 stocks with Philip Morris taking the third spot at 8.1% of the total assets.

Food & Staples Retailing (22.2%), Household Products (20.4%) and Beverages (20.2%) take the top three spots. XLP is actively traded with average daily volume of around 11 million shares. The fund is one of the cheapest in the category with 14 basis points as expenses. The ETF lost 0.6% on Wednesday. The product has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Fidelity MSCI Consumer Staples ETF (LON:FSTA)

This fund tracks the MSCI USA IMI (LON:IMI) Consumer Staples Index and holds about 100 stocks in its basket with Philip Morris taking the fourth spot at 7.56% of the total assets. It is a large-cap centric fund, heavily concentrated in the top 10 holdings with 61.9% of the assets. Food & Staples Retailing takes the top spot at 21.5% share, closely followed by Beverages (21.5) and Food Products (20%).

The fund has amassed $268.6 million in its asset base while average daily volume is moderate at 78,000 shares. The fund is the cheapest in the category with 8 basis points as expenses. The ETF declined 0.4% yesterday. Like XLP, the product has a Zacks ETF Rank #3 with a Medium risk outlook (read: Fidelity Slashes Fees for 11 Sector ETFs).

Vanguard Consumer Staples ETF VDC

The fund is the second most popular product in the space managing an asset base of $3.4 billion while average daily volume is moderate at around 129,000 shares. VDC tracks the MSCI US IMI Consumer Staples 25/50 index and holds about 99 stocks. Philip Morris takes the fourth spot in the basket at 6.9% of the total assets.

Household Products (19.1%), Packaged Foods & Meats (19%) and Soft Drinks (17.3%) take the top three spots of the fund. It has a low expense ratio of 0.10% and has lost 0.5% on Wednesday. The fund has a Zacks ETF Rank #3 with a Medium risk outlook.

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