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Procter & Gamble (PG) Shares Up on Earnings: ETFs in Focus
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One of the most famous names in the consumer products world – Procter & Gamble (PG - Free Report) – gave investors sweet surprises on Apr 21, 2023 by beating the Zacks Consensus Estimate for both earnings and sales in third-quarter fiscal 2023. In addition, the company’s raised sales guidance for fiscal 2023 added to the upbeat tone. The stock gained about 3.5% in the key trading session.
Let’s delve a little deeper and see if PG’s strong numbers can do further good to the sector.
Inside the Result
Procter & Gamble’s earnings of $1.37 per share increased 3% from $1.33 in the year-ago quarter. The figure also beat the Zacks Consensus Estimate and our estimate of $1.32. Currency-neutral core earnings per share (EPS) rose 13% year over year.
The company has reported net sales of $20,068 million, up 4% year over year. Sales surpassed the Zacks Consensus Estimate of $19,295 million and our estimate of $18,824.6 million. The increase in sales can be attributed to growth across all segments. Currency impacted net sales by 4%.
On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues improved 7%, backed by a 10% rise in pricing and a 1% gain from a positive product mix, offset by a 3% decline in volume.
In the reported quarter, the gross margin increased 150 basis points (bps) to 48.2%. Favorable currency rates aided the gross margin by 0.7%. The currency-neutral gross margin improved 220 bps to 48.9%.
Fiscal 2023 Guidance
Management has raised its sales view for fiscal 2023, while it retained its earnings outlook. For fiscal 2023, the company anticipates year-over-year all-in sales growth of 1% compared with down 1% and flat stated earlier. Organic sales are likely to increase 6% in fiscal 2023 versus 4-5% growth mentioned earlier. Currency movements are expected to negatively impact all-in sales growth by 5%.
The company has retained its view for fiscal 2023 EPS. It expects reported EPS to be flat to up 4% from the $5.81 reported in fiscal 2022. However, the company expects EPS at the low end of the prior-mentioned range due to the ongoing commodity and material cost headwinds, and currency impacts.
Shareholders’ Value Maximization
The company returned $3.6 billion of value to its shareholders in the fiscal third quarter. This included $2.2 billion of dividend payouts and $1.4 billion of share buybacks.
Consumer ETF Impact
Thanks to an upbeat earnings release, shares of PG notched up about 3.5% in the key trading session of Apr 21, 2023. The gain also reflected in the ETF world, with consumer staples funds being benefited moderately. 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.
Let’s take a look at the following three ETFs with a solid allocation to Procter & Gamble.
Consumer Staples Select Sector SPDR Fund (XLP - Free Report)
The most popular consumer ETF on the market, XLP, follows the S&P Consumer Staples Select Sector Index. The in-focus P&G takes the first spot, making up roughly 14% of the assets. The fund has returned about 0.7% on Apr 21, 2023. The fund has a Zacks Rank #2 (Buy).
This fund manages a $6.91 billion asset base and provides exposure to a basket of 89 consumer stocks. The product charges a low fee of 10 bps per year from investors. Here too, P&G is the top firm with 12.75% allocation. VDC advanced about 0.6% on Apr 21, 2023. The fund has a Zacks Rank #3 (Hold).
This ETF tracks the Dow Jones U.S. Consumer Goods Index, giving investors exposure to the broad consumer staples space. The fund has AUM of $1.77 billion. Like the other two, the stock under consideration occupies the top position in the basket with about 16% of assets. The fund gained 0.7% on Apr 21. The fund has a Zacks Rank #3.
Bottom Line
Even though PG had a favorable day, its impact on the rest of the consumer staples market wasn’t as solid as some might expect. Yes, all of the major consumer staples ETFs were up, but their gains were not profuse.
Consumer staples delivered a good show in recent months on global growth concerns as this safe sector had a reason to outperform. However, such a rally added to the overvaluation concern.
But if PG’s outlook is any guide, the sector has still something to offer. However, to come to any conclusion, we need to keep a track on earnings of other staples giants.
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Procter & Gamble (PG) Shares Up on Earnings: ETFs in Focus
One of the most famous names in the consumer products world – Procter & Gamble (PG - Free Report) – gave investors sweet surprises on Apr 21, 2023 by beating the Zacks Consensus Estimate for both earnings and sales in third-quarter fiscal 2023. In addition, the company’s raised sales guidance for fiscal 2023 added to the upbeat tone. The stock gained about 3.5% in the key trading session.
Let’s delve a little deeper and see if PG’s strong numbers can do further good to the sector.
Inside the Result
Procter & Gamble’s earnings of $1.37 per share increased 3% from $1.33 in the year-ago quarter. The figure also beat the Zacks Consensus Estimate and our estimate of $1.32. Currency-neutral core earnings per share (EPS) rose 13% year over year.
The company has reported net sales of $20,068 million, up 4% year over year. Sales surpassed the Zacks Consensus Estimate of $19,295 million and our estimate of $18,824.6 million. The increase in sales can be attributed to growth across all segments. Currency impacted net sales by 4%.
On an organic basis (excluding the impacts of acquisitions, divestitures and foreign exchange), revenues improved 7%, backed by a 10% rise in pricing and a 1% gain from a positive product mix, offset by a 3% decline in volume.
In the reported quarter, the gross margin increased 150 basis points (bps) to 48.2%. Favorable currency rates aided the gross margin by 0.7%. The currency-neutral gross margin improved 220 bps to 48.9%.
Fiscal 2023 Guidance
Management has raised its sales view for fiscal 2023, while it retained its earnings outlook. For fiscal 2023, the company anticipates year-over-year all-in sales growth of 1% compared with down 1% and flat stated earlier. Organic sales are likely to increase 6% in fiscal 2023 versus 4-5% growth mentioned earlier. Currency movements are expected to negatively impact all-in sales growth by 5%.
The company has retained its view for fiscal 2023 EPS. It expects reported EPS to be flat to up 4% from the $5.81 reported in fiscal 2022. However, the company expects EPS at the low end of the prior-mentioned range due to the ongoing commodity and material cost headwinds, and currency impacts.
Shareholders’ Value Maximization
The company returned $3.6 billion of value to its shareholders in the fiscal third quarter. This included $2.2 billion of dividend payouts and $1.4 billion of share buybacks.
Consumer ETF Impact
Thanks to an upbeat earnings release, shares of PG notched up about 3.5% in the key trading session of Apr 21, 2023. The gain also reflected in the ETF world, with consumer staples funds being benefited moderately. 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.
Let’s take a look at the following three ETFs with a solid allocation to Procter & Gamble.
Consumer Staples Select Sector SPDR Fund (XLP - Free Report)
The most popular consumer ETF on the market, XLP, follows the S&P Consumer Staples Select Sector Index. The in-focus P&G takes the first spot, making up roughly 14% of the assets. The fund has returned about 0.7% on Apr 21, 2023. The fund has a Zacks Rank #2 (Buy).
Vanguard Consumer Staples ETF (VDC - Free Report)
This fund manages a $6.91 billion asset base and provides exposure to a basket of 89 consumer stocks. The product charges a low fee of 10 bps per year from investors. Here too, P&G is the top firm with 12.75% allocation. VDC advanced about 0.6% on Apr 21, 2023. The fund has a Zacks Rank #3 (Hold).
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 broad consumer staples space. The fund has AUM of $1.77 billion. Like the other two, the stock under consideration occupies the top position in the basket with about 16% of assets. The fund gained 0.7% on Apr 21. The fund has a Zacks Rank #3.
Bottom Line
Even though PG had a favorable day, its impact on the rest of the consumer staples market wasn’t as solid as some might expect. Yes, all of the major consumer staples ETFs were up, but their gains were not profuse.
Consumer staples delivered a good show in recent months on global growth concerns as this safe sector had a reason to outperform. However, such a rally added to the overvaluation concern.
But if PG’s outlook is any guide, the sector has still something to offer. However, to come to any conclusion, we need to keep a track on earnings of other staples giants.