Thursday’s ETF To Watch: Dow Jones U.S. Consumer Goods Index Fund (IYK)

by on February 9, 2012 | ETFs Mentioned:

As earnings season draws to a close, investors will soon be forced to face international affairs head on. For the time being, earnings reports from companies like McDonald’s and other blue chip firms have done well to keep our minds off of the looming debt crisis that has been ailing the euro zone for quite some time. But before these issues are pulled out of the doldrums, there are still a few big name firms that will be reporting earnings this week that will more than likely dominate the market [see also The Ten Commandments of Commodity Investing].

Today will see the fourth quarter earnings results from Philip Morris International (PM). Philip Morris is an international cigarette and tobacco company that spun off of Altria Group (MO) in 2008. The firm is now home to a decent market share of the world’s tobacco sales. Though tobacco has become a more controversial product in the last few decades, it is still considered a relatively inelastic product that is a daily necessity for many people. PM operates wholly outside of the U.S. though it does have its headquarters in New York City [see also iShares: The Low Cost ETF Issuer?].

This earnings statement will mark the fourth quarter results for the company and will therefore comment on the entire previous year as well as the tailing three month stretch. “The average estimate of analysts is for net income of $1.08 per share, a rise of 11.3% from the company’s actual earnings for the same quarter a year ago. During the past three months, the average estimate has moved up from $1.03. Between one and three months ago, the average estimate moved up. It has been unchanged at $1.08 during the last month. For the year, analysts are projecting profit of $4.85 per share, a rise of 25.3% from last year” writes Derek Hoffman.

In light of this earnings release, today’s ETF to watch will be the Dow Jones U.S. Consumer Goods Index Fund (IYK). This fund measures the performance of the consumer goods sector of the U.S. equity market. Note that PM’s headquarters in NYC make it an S&P 500 component and is therefore considered a U.S. equity despite operating outside of domestic borders. PM comes in as the third largest holding for this fund and accounts for approximately 9.5% of the entire ETF. If their earnings come in below Wall Street’s estimates, look for IYK to endure a rough day, but a strong report could make for a lucrative trading opportunity for this ETF [see also The Truth About Alternative Weighting Methodologies (And ETFs)].

Disclosure: No positions at time of writing.