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How Has Philip Morris' Q1 Earnings Beat Impacted Staples ETFs?

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Philip Morris International Inc. (PM - Free Report) reported first-quarter 2021 results on Apr 20, before market open. Earnings and revenues topped estimates and rose year over year. Since the earnings release, Philip Morris’ shares have gained about 3.2% as of Apr 23.

Q1 Performance in Detail

Philip Morris reported adjusted earnings per share (EPS) of $1.57, beating the Zacks Consensus Estimate of $1.40. Moreover, the bottom line climbed 29.8% year over year. Furthermore, the metric rose 21.5% on an organic basis.

Net revenues of $7.59 billion surpassed the Zacks Consensus Estimate of $7.18 billion. Moreover, the top line rose 6% year over year and 2.9% on an organic basis.

During the reported quarter, the company saw an adverse volume/mix, mainly due to soft cigarette volumes. Philip Morris, however, saw favorable pricing variance and higher fees for certain distribution rights.

Going on, adjusted operating income stood at $3.49 billion, up 25.2% year on year. The metric climbed 18.5% on an organic basis.

Shipment Volume

The company’s total cigarette and heated tobacco unit shipment volumes fell 3.7% to 167.2 billion units. While cigarette shipment volumes declined 7.3% to around 145.5 billion units in the first quarter, heated tobacco unit shipment volumes of almost 21.7 billion units reflected a year-over-year rise of 29.9%.

There was a decline in shipment volumes in the European Union, Eastern Europe, Middle East & Africa, South & Southeast Asia and Latin America & Canada regions.

Pandemic Not a Big Concern

Philip Morris informed that it currently has sufficient access to inputs and is not facing any major supply-related hurdles. Going on, all of the company’s cigarette and heated tobacco production units are operational across the globe. The ongoing health crisis doesn’t have any significant impact on the availability of the company’s products. Further, Philip Morris has ample liquidity to manage business. The company does not anticipate a near-term recovery in its duty-free business due to travel-related uncertainties. In fact, management expects the existing dynamics to persist through the end of 2021.

Guidance Updated

Philip Morris updated view for 2021 and now expects adjusted earnings per share in the range of $5.95-$6.05. At constant currency, adjusted EPS is expected to grow 11-13% to $5.75-$5.85 compared with $5.17 reported in 2020. For 2021, Phillip Morris expects net revenue increase of nearly 5-7% on an organic basis. Adjusted operating margin on an organic basis is likely to jump 200 basis points (bps) in 2021.

For second-quarter 2021, the company expects earnings in the bracket of $1.50-$1.55, including favorable currency impact of nearly 4 cents per share.

ETF Impact

Some consumer staples ETFs with significant exposure to Philip Morris seem to have gained since its earnings release.

Fidelity MSCI Consumer Staples Index ETF (FSTA - Free Report)

This fund offers exposure to the U.S. Consumer Staples sector at a very low expense ratio. It has AUM of $879.8 million and charges a fee of 8 bps a year. It has 4.5% exposure to Philip Morris.

Since the earnings release, the fund has gained about 0.2% (as of Apr 23). FSTA has a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (see all Consumer Staples ETFs here).

iShares U.S. Consumer Goods ETF (IYK - Free Report)

This ETF tracks the Dow Jones U.S. Consumer Goods Index, giving investors exposure to the consumer goods space. It has AUM of $716.3 million and charges a fee of 43 bps a year, as stated in the prospectus. It has 4.5% exposure to Philip Morris.

Since the earnings release, the fund has risen about 0.7%. However, the fund has a Zacks ETF Rank #3, with a Medium-risk outlook (read: Tesla to Report After the Bell: What Lies Ahead for ETFs?).

Vanguard Consumer Staples ETF (VDC - Free Report)

This fund is one of the most popular in the U.S. Consumer Staples sector. It has AUM of $5.64 billion and charges a fee of 10 basis points a year. It has 4.5% exposure to Philip Morris.

Since the earnings release, the fund has risen about 0.1%. VDC has a Zacks ETF Rank #3, with a Medium-risk outlook.

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