ETFs Jump on Walmart Q2 Earnings Beat

·4 min read

Before the opening bell yesterday, Walmart WMT spread optimism into the broad sector and the stock market following the upbeat second-quarter fiscal 2023 results. The mega retailer surpassed both earnings and revenue estimates and lifted its full-year profit outlook.

Shares of WMT spiked as much as 6.2% — the highest in almost two years — following the earnings announcement and closed at up 5.6%. As such ETFs having the highest allocation to the world's largest brick-and-mortar retailers also soared. These include VanEck Vectors Retail ETF RTH, Vanguard Consumer Staples ETF VDC, Fidelity MSCI Consumer Staples Index ETF FSTA and iShares Evolved U.S. Discretionary Spending ETF IEDI.

Walmart Earnings in Focus

Earnings per share came in at $1.77, outpacing the Zacks Consensus Estimate of $1.60 but a penny lower than the year-ago earnings. Revenues rose 8.4% year over year to $152.9 billion and topped the consensus mark of $151.4 billion. U.S. comparable sales grew 6.5%.

The world's biggest retailer now expects earnings per share to drop around 9-11% for the full fiscal year, better than the late-July projection of a decline of 11-13%. Sales are expected to grow about 4.5%, with a $2.1 billion headwind in the second half, thanks to currency exchange rates. The company also expects Walmart U.S. comp sales, excluding fuel, to rise about 3% in the second half of the year, or 4% for the full year (read: Wal-Mart Tumbles on Profit Warnings: ETFs in Focus).

For third-quarter fiscal 2023, earnings per share are expected to drop 9-11%, while sales will likely grow about 5%, and U.S. comp sales, excluding fuel, will rise about 3% year over year.

Below, we have detailed the ETFs:

VanEck Vectors Retail ETF (RTH)

VanEck Vectors Retail ETF provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. Walmart takes the fourth spot with a 7.5% share.

VanEck Vectors Retail ETF has amassed $171.3 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 8,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Vanguard Consumer Staples ETF (VDC)

Vanguard Consumer Staples ETF also targets the broad consumer staples by tracking the MSCI US Investable Market Consumer Staples 25/50 Index. It holds 100 stocks in its basket, with Walmart occupying the fifth position, having a 7.1% allocation. Vanguard Consumer Staples ETF is widely spread across soft drinks, household products, packaged foods & meats, and hypermarkets & supercenters that make up for a double-digit allocation each (see: all Consumer Staples ETFs here).

Vanguard Consumer Staples ETF manages a $7 billion asset base and charges a fee of 10 bps per year. VDC trades in a good volume of around 181,000 shares per day, on average, and has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook.

Fidelity MSCI Consumer Staples Index ETF (FSTA)

Fidelity MSCI Consumer Staples Index ETF tracks the MSCI USA IMI Consumer Staples Index, holding 110 stocks in its basket. Of these, Walmart takes the fifth spot with a 7% share in FSTA. Fidelity MSCI Consumer Staples Index ETF is widely diversified across beverages, food and staples retailing, food products and household products, with double-digit exposure each.

Fidelity MSCI Consumer Staples Index ETF has amassed $1 billion in its asset base while trading in a moderate volume of around 132,000 shares a day, on average. FSTA charges 8 bps in annual fees from investors and has a Zacks ETF Rank #4 with a Medium risk outlook.

iShares Evolved U.S. Discretionary Spending ETF (IEDI)

iShares Evolved U.S. Discretionary Spending ETF is an actively managed ETF that employs data science techniques to identify companies with exposure to the discretionary spending sector. It follows the Cboe BZX, formerly known as BATS, and holds 218 stocks in its basket. Walmart occupies the fourth position with a 5.6% share. IEDI is dominated by retailing with half of the portfolio, while food & staples retailing and consumer services round off the next two with double-digit exposure each (read: Buy Discretionary ETFs on Improving Consumer Sentiment).

iShares Evolved U.S. Discretionary Spending ETF has accumulated $16.2 million in its asset base and charges 18 bps in fees per year. Volume is paltry for IEDI as it exchanges 1,000 shares a day, on average.


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Walmart Inc. (WMT) : Free Stock Analysis Report
 
VanEck Retail ETF (RTH): ETF Research Reports
 
Vanguard Consumer Staples ETF (VDC): ETF Research Reports
 
Fidelity MSCI Consumer Staples Index ETF (FSTA): ETF Research Reports
 
iShares Evolved U.S. Discretionary Spending ETF (IEDI): ETF Research Reports
 
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