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PepsiCo at All-Time High Post Earnings: Staples ETFs in Focus

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PepsiCo Inc. (PEP - Free Report)  reported first-quarter 2019 results on Apr 17, before markets open. Earnings topped estimates on solid Frito-Lay snacks growth and strong operating performance by the international divisions. Shares jumped about 3.8% in the key trading session to reach a record high.

PepsiCo’s first-quarter core earnings per share (EPS) of 97 cents beat the Zacks Consensus Estimate of 92 cents and increased nearly 1% year over year. In constant-currency terms, core earnings improved 3% from the year-ago period. The company’s reported earnings of $1.00 per share improved 6% year over year. Foreign exchange translation unfavorably impacted reported EPS by 2 percentage points.

Net revenues of $12.88 billion advanced 2.6% year over year and surpassed the Zacks Consensus Estimate of $12.65 billion. Notably, revenues included a negative impact of 3 percentage points from foreign exchange (Fx). On an organic basis, excluding currency headwinds, revenues increased 5.2%.

Effective net pricing resulted in some revenue growth. For example, sales volume for its North American beverage business fell 2% during the quarter ending Mar 23, but PepsiCo hiked prices by 4%, resulting in 2% sales growth, per CNBC.

ETF Impact

The consumer staples ETFs having notable exposure to PepsiCo also seemed to have benefited on Apr 17 (see all Consumer Staples ETFs here).

Consumer Staples Select Sector SPDR Fund (XLP - Free Report)

The most-popular consumer ETF in the market, XLP, follows the S&P Consumer Staples Select Sector Index. Of its 33 holdings, the in-focus PepsiCo takes the third spot, making up roughly 9.83% of the fund.

In terms of sector exposure, the fund is skewed toward beverages (25.2%), which make up for one-fourth share, closely followed by Household Products (24.9%) and Food & Staples Retailing (19.74%). The fund was up about 0.5% on Apr 17 but has a Zacks Rank #1 (Strong Buy). The fund yields 2.73% annually.

Vanguard Consumer Staples ETF (VDC - Free Report)

This fund provides exposure to a basket of 92 consumer stocks. PepsiCo takes the third position holding 8.7%. The product is widely spread across various sectors, of which soft drinks take 19.5% allocation. The fund has a Zacks Rank #1 and advanced about 0.4% on Apr 17. The fund yields 2.64% annually.

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 holds about 109 stocks in its basket. Here too, PepsiCo occupies the third position in the basket with 7.97% of assets. IYK is also widely diversified across sectors, with food beverage tobacco making up about 46%. However, the fund has a Zacks ETF Rank #4 (Sell) and added about 0.5% on Apr 17 (read: Valuations Still High in Consumer Staples: 6 ETFs to Shun).

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