The Procter & Gamble Company Earnings Lift Consumer Staples ETFs

new etfsOne of the most famous names in the consumer products world – Procter & Gamble (NYSE:PG) – reported a mixed-bag fourth-quarter 2014 on August 1, before the opening bell with earnings surpassing the estimate and the top line missing by a whisker. However, the issuance of a positive full fiscal 2015 guidance spread optimism among investors.

P&G 4Q14 Earnings in Focus 

The world’s largest consumer-products maker’s fourth-quarter adjusted earnings (excluding restructuring cost and charges for European legal matters) of 95 cents per share beat the Zacks Consensus Estimate of 91 cents by 4.4%. Also, earnings surged 20% in the quarter overruling currency headwinds of 4 cents. Pricing gains, cost containment and reduced taxes were the reasons behind this jump.

Though net sales slipped 1% to $20.16 billion due to a stronger dollar, revenues fell short of the Zacks Consensus Estimate of $20.397 billion.  Organically (excluding the impact of acquisitions, divestitures and foreign exchange), revenues were up 2%. Revenue gains were realization driven rather than volume driven.

Further, Procter & Gamble has given an encouraging guidance for fiscal 2015. The company expects core earnings per share to grow in the mid single-digit range while sales increase is expected in the low single-digit range. Organic sales are expected to climb low-to-mid single-digit range, indicating optimism.

Following a decent earnings release, shares of PG climbed about 3% in the key trading session of August 1 on double the normal volume and added about 0.1% after hours.

ETF Impact 

The rally in P&G shares was reflected in the ETF world, with consumer staples ETFs advancing in the key trading session of Friday. Many of the key funds in this segment have a double-digit allocation to the consumer product giant suggesting that the performance of the fund is highly dependent on P&G’s performance.

In particular, higher trading was seen in the following three ETFs, as these have the largest allocations to Procter & Gamble (see all consumer staples ETFs here):

Consumer Staples Select Sector SPDR Fund (XLP)

The most popular consumer ETF on the market, XLP, follows the S&P Consumer Staples Select Sector Index. The fund invests about $5.75 billion of assets in 42 holdings. Of these firms, the in-focus P&G takes the first spot, making up roughly 13% of the assets.

In terms of sector exposure, the fund is skewed toward food & staples retailing which makes up for one-fourth share, closely followed by household products (20%) and beverages (19.5%).


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