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Wal-Mart's Solid Q1 Results Put These ETFs in Focus

Wal-Mart WMT reported strong first-quarter fiscal 2019 results. The mega retailer managed to deliver positive earnings surprise after missing estimates in the fourth quarter of fiscal 2018. Earnings per share came in at $1.14, beating the Zacks Consensus Estimate by a couple of cents and improving 14% from the year-ago earnings.

Revenues increased 4.4% year over year to $122.69 billion and were ahead of the consensus mark of $122.12 billion. Same-store sales grew for the fifteenth consecutive quarter, climbing 2.1% year over year while online sales rose 33% after a disappointing 23% increase in the fourth quarter. 

Earlier this month, the brick-and-mortar retailer agreed to acquire Indian e-commerce giant Flipkart for $16 billion that is expected to reduce WMT’s fiscal year 2019 earnings per share by about 25-30 cents should the transaction be completed at the end of the second quarter (read: Walmart Acquires 77% in Flipkart: ETFs in Focus).

Market Impact

Despite the healthy results, shares of WMT fell 1.9% on the day amid sustained rise in crude oil prices, which would likely curtail discretionary spending and be a drag on the company’s revenues and profitability. Though Wal-Mart belongs to a bottom-ranked Zacks industry (bottom 39%), it currently carries a Zacks Rank #3 (Hold) and has a top VGM Score of A.

Consequently, ETFs having the highest allocation to the world's largest brick-and-mortar retailer will be in focus in the days ahead. Investors should closely monitor the movement in these funds and grab the opportunity when it arises. These ETFs have seen rough trading following Wal-Mart’s results.

iShares Edge MSCI Multifactor Consumer Staples ETF CNSF

This fund targets companies that have the potential to outperform the broader U.S. consumer staples sector and tracks the MSCI USA Consumer Staples Diversified Multiple-Factor Capped Index. Holding 27 stocks in its basket, Wal-Mart takes the top spot, accounting for 9.7% of the portfolio. In terms of industrial exposure, about 58.3% of the portfolio is dominated by food, beverage and tobacco while household and personal product, and food & staples retailing take the remainder with a double-digit exposure each. CNSF has attracted $2.4 million in its asset base and trades in a meager volume of about 1000 shares. It charges 35 bps in fees per year and has shed 0.5% following Wal-Mart results. It has a Zacks ETF Rank #4 (Sell) (read: Will Q1 Earnings Bring More Pain for Wal-Mart ETFs?).

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, WMT occupies the third position in the basket with 9.04% share. The ETF has a certain tilt toward specialty retail, which accounts for 32% of the portfolio while Internet direct marketing (23%), hypermarkets (14%), and departmental stores (10%) round off the next three spots. The product has amassed $69.8 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 15,000 shares per day. RTH lost 0.1% post WMT results and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Consumer Staples Select Sector SPDR Fund XLP

This is the most popular consumer staples ETF with AUM of $7.5 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 million shares a day. In total, the fund holds about 33 securities in its basket with Wal-Mart taking the fifth spot at 7.9%. From a sector look, beverages takes the largest share at 26.7% while food and staples retailing, household products, food products and tobacco account for a double-digit allocation each. XLP gained 0.4% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook.

Fidelity MSCI Consumer Staples Index ETF FSTA

This fund tracks the MSCI USA IMI Consumer Staples Index, holding 95 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, food products, household products, and tobacco. It has amassed $245.9 million in its asset base while trading in a moderate volume of around 91,000 shares a day on an average. It charges 8 bps in annual fees from investors and has added 0.3% following Wal-Mart results. The product has a Zacks ETF Rank #4 with a Medium risk outlook (see: all Consumer Staples ETFs here).

Vanguard Consumer Staples ETF VDC

This fund manages a $3.6 billion asset base and has exposure to a basket of 97 consumer stocks by tracking the MSCI US Investable Market Consumer Staples 25/50 Index. It is a low cost choice in the consumer staples space, charging a fee of just 10 bps per year and trading in a good volume of around 131,000 shares. Here, WMT occupies the fourth position in the basket with 7.2% 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 added 0.2% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook.

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SPDR-CONS STPL (XLP): ETF Research Reports
VANECK-RETAIL (RTH): ETF Research Reports
ISHRS-EMS MCS (CNSF): ETF Research Reports
VIPERS-CONS STA (VDC): ETF Research Reports
FID-STAPLES (FSTA): ETF Research Reports
Walmart Inc. (WMT): Free Stock Analysis Report
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