Walmart Beats on Earnings, Raises View: ETFs in Focus

Sweta Killa

Walmart WMT spread optimism in the retail space by reporting robust third-quarter fiscal 2020 results. The mega retailer topped earnings estimates but fell shy of the consensus mark for revenues. Additionally, the company raised full-year forecast.

Earnings per share came in at $1.16, beating the Zacks Consensus Estimate by 7 cents. Also, the bottom line increased from the year-ago figure of $1.08. Revenues inched up 2.5% year over year to $128 billion but fell short of the estimated $129 billion. U.S. same-store sales grew 3.2% in the quarter. E-commerce sales jumped 41% driven by strong growth in online grocery (read: Time to Flock to E-commerce ETFs Ahead of Holiday Season?).

The brick-and-mortar retailer lifted its fiscal 2020 view. Including Flipkart, it now expects adjusted earnings per share to increase slightly, and to rise in the high single-digit percentage range, excluding it. Previously, WMT expected a slight decrease to slight increase in earnings per share including Flipkart, and an increase in the mid-to-high single digit range, excluding it.

Market Impact

Following the release, shares of WMT jumped as much as 3.6% on the day to hit new high of $125.38 but fell 0.3% at the end of the trading session. The stock also crushed its average daily volume figures as nearly 22.25 million shares moved hands compared with 5.3 million on average. WMT currently has a Zacks Rank #2 (Buy) and a VGM Score of A, suggesting strong upside in the coming months. However, it belongs to an unfavorable Zacks industry (placed at the bottom 38% of 250+ industries) (see: all Consumer Staples ETFs here).

Consequently, ETFs having the highest allocation to the world's largest brick-and-mortar retailer have been in focus following the results. Below, we have highlighted six of them:

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, WMT occupies the third position in the basket with 9.1% share. The product has amassed $86.1 million in its asset base and charges 35 basis points (bps) in annual fees. Volume is light as it exchanges nearly 9,000 shares per day. RTH gained 0.5% 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 $13.1 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 13.3 million shares a day. In total, the fund holds about 33 securities in its basket with WMT taking the fourth spot at 9.2%. From a sector perspective, beverages take the largest share at 25.1% while household products, food and staples retailing, and food products account for a double-digit allocation each. XLP shed 0.1% on the day and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Tap Revenue Growth With These ETFs & Dump Earnings Recession).

Fidelity MSCI Consumer Staples Index ETF FSTA

This fund tracks the MSCI USA IMI Consumer Staples Index, holding 89 stocks in its basket. Out of these, WMT takes the fourth spot with 8.6% share. The ETF is widely diversified across beverages, household products, food and staples retailing, food products, and tobacco. It has amassed $557.4 million in its asset base, while trading in moderate volume of around 135,000 shares a day on average. It charges 8 bps in annual fees from investors and lost 0.1% following WMT results. The product has a Zacks ETF Rank #1 with a Medium risk outlook.

Vanguard Consumer Staples ETF VDC

This fund manages a $5.3 billion asset base and has exposure to a basket of 89 consumer stocks by tracking the MSCI US Investable Market Consumer Staples 25/50 Index. It charges a fee of 10 bps per year and trades in a good volume of around 118,000 shares per day on average. Here, WMT occupies the fourth position in the basket with 8.1% allocation. The product is widely spread across household products, soft drinks, packaged foods & meat, hypermarkets & super centers, and tobacco that make up for a double-digit allocation each. The fund was down 0.1% on the day and has a Zacks ETF Rank #1 with a Medium risk outlook.

First Trust Nasdaq Retail ETF FTXD

The fund follows the Nasdaq US Smart Retail Index and holds 49 stocks in its basket. WMT takes the top spot with 7.8% of the assets. FTXD has accumulated $8.5 million in its asset base and has an expense ratio of 0.60%. The ETF has added 0.8% post WMT results and has a Zacks ETF Rank #3 (read: Is the Retail Picture Truly Gloomy? ETFs in Focus).

iShares Evolved U.S. Discretionary Spending ETF IEDI

This is an actively-managed ETF that employs data science techniques to identify companies with exposure to the discretionary spending sector. Holding 217 stocks in its basket, WMT occupies the third position with 6.7% share. The fund has accumulated $9.1 million in its asset base and charges 18 bps in fees per year. Volume is paltry as it exchanges 6,000 shares a day on average. IEDI gained 0.4% following WMT results.

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