U.S. Markets closed

Staple ETFs Shine on Philip Morris' Q3 Earnings Release

Sweta Jaiswal, FRM

Philip Morris International Inc. (PM) reported third-quarter 2019 results on Oct 17, before market open. Earnings and revenues topped estimates on increased revenues and shipment volumes in the heated tobacco category along with favorable pricing. Since the earnings release, Philip Morris’ shares have gained about 3.4% to close at $81.78 on Oct 23 (read: Top-Ranked Sector ETFs to Buy for Q4).

Q3 in Detail

Philip Morris reported adjusted earnings per share (EPS) of $1.43, beating the Zacks Consensus Estimate of $1.35. However, the bottom line declined 0.7% year over year. After excluding currency, the bottom line rose 5.9%.  

Net revenues of $7,642 million surpassed the Zacks Consensus Estimate of $7,610 million. Moreover, the top line rose 1.8% year over year. Furthermore, the metric increased 3.4% at constant currency (cc) on favorable pricing across most regions and volume/mix.

Adjusted operating income went up 0.9% year over year to $3,184 million.

Shipment Volume

The company’s total cigarette and heated tobacco unit shipment volume fell 2.1% to 199.5 billion units. While cigarette shipment volume declined 5.9% to 183.5 billion units in the third quarter, heated tobacco unit shipment volume of almost 16 billion units reflected a year-over-year rise of 84.8%.

Shipment volumes in the European Union, Eastern Europe, South & Southeast Asia and East Asia & Australia regions rose 7.2%, 15.6%, 4.1% and 7.4% year over year, respectively. Meanwhile, there was a decline in shipment volumes in the Middle East & Africa, and Latin America & Canada regions.

Outlook Reiterated

Philip Morris reiterated its outlook for 2019. Adjusted earnings are expected to be $5.14. The view indicates growth of almost 6% from the year-ago quarter’s figure. Excluding the impact of unfavorable currency of approximately 14 cents, earnings are projected to rise at least 9% to $5.28. Further, management expects effective tax rate for 2019 of 23%.

ETF Impact

Some consumer staples ETFs with significant exposure to Philip Morris seemed to have gained on Oct 23 (see all Consumer Staples ETFs here).

Vanguard Consumer Staples ETF VDC

This fund is one of the most popular funds in the Consumer Staples sector of the United States. It has AUM of $5.35 billion and charges a fee of 10 basis points a year. From a sector-look, Household products, Soft drinks and Packaged Foods & Meats have the highest exposure to the fund, with 23.5%, 21.1% and 17.4% allocation, respectively. It has 4.2% exposure to Philip Morris.

The fund has returned 10% in a year and 13.1% year to date. Since the earnings release, the fund has gained about 1.5% to close at $155.83 on Oct 23. VDC has a Zacks ETF Rank #1 (Strong Buy), with a Medium risk outlook (read: Solid PG Earnings to Further Boost Staples ETFs).

Fidelity MSCI Consumer Staples Index ETF FSTA

This fund offers exposure to the Consumer Staples sector of the United States at a very low expense ratio. It has AUM of $644.2 million and charges a fee of 8 basis points a year. From an industry-exposure look, Beverages, Household Products and Food & Staples Retailing have the highest exposure to the fund, with 25%, 22.5% and 21.6% allocation, respectively. It has a 6.28% exposure to Philip Morris. The fund has returned 10.7% in a year and 14% year to date.

Since the earnings release, the fund has gained about 1.4% to close at $36.55 on Oct 23. FSTA has a Zacks ETF Rank #1 with a Medium risk outlook (read: Top-Performing Consumer Staples ETFs This Year).

iShares U.S. Consumer Goods ETF IYK

This ETF tracks the Dow Jones U.S. Consumer Goods Index, giving investors exposure to the broad Consumer Staples space. It has AUM of $481.2 million and charges a fee of 42 basis points a year. From a sector-look, Food Beverage Tobacco, Household & Personal Products and Consumer Durables have the highest exposure to the fund, with 45.3%, 22.2% and 16.6% allocation, respectively. It has an exposure of 5.59% to Philips Morris.

The fund has returned 11% in a year and 11.2% year to date. However, the fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Since the earnings release, the fund has gained about 1.3% to close at $127 on Oct 23. 

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
iShares U.S. Consumer Goods ETF (IYK): ETF Research Reports
 
Vanguard Consumer Staples ETF (VDC): ETF Research Reports
 
Fidelity MSCI Consumer Staples Index ETF (FSTA): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report