XLP’s Future Earnings Outlook Is Tilting Up

The companies you own inside this consumer staples fund are collectively signaling stronger profits are on the way.

The State Street Consumer Staples Select Sector SPDR ETF (XLP) returned +9.4% over the past year, but the more telling signal for what comes next lies inside the fund itself. Among its largest holdings, companies making up 32% of the fund’s total weight have recently raised their forward guidance for earnings, revenue, or cash flow.

A Decidedly Positive Lean

That figure is the key to understanding the fund’s forward momentum. It stands in sharp contrast to the holdings that trimmed their outlook, which account for just 10.7% of the fund. The rest left their guidance unchanged. When you own an index fund, you own the collective trajectory of its companies, and right now, the weight of the evidence is pointing toward improving fundamentals.

Who’s Pulling the Weight?

This positive tilt isn’t abstract; it’s driven by specific, heavyweight positions. The single biggest contributor was Walmart (WMT), which accounts for more than 10% of the fund and raised its EPS guidance by 8%. Other large holdings like Coca-Cola (KO), at 7.0% of the fund, also nudged their forecasts higher, showing the positive sentiment is not isolated to a single name.

Of course, not every company is on the same path. The most significant downward revision came from Philip Morris International (PM). At 6.1% of the fund, it lowered its EPS guidance by 4%. But on balance, the positive revisions from companies like Walmart carry far more weight across the portfolio.

A Signal That Can Lead the Price

Why does this matter for you as an owner of XLP? A company’s own guidance is one of the earliest indicators of its future earnings power. When you see a broad-based tilt where the weight of companies raising their outlook is nearly three times the weight of those cutting it, it suggests the fund’s underlying earnings momentum is strengthening. This kind of forward-looking check is important, as sometimes a fund’s price can get ahead of its fundamentals.

For an investor in XLP, this is the bottom line. You own a basket of companies that are, in aggregate, telling the market to expect better results ahead. While no signal is a guarantee, having the fund’s own holdings guide their earnings higher provides a fundamental tailwind that a simple price chart or trailing valuation multiple doesn’t show.

So Why Not Just Buy The Companies Raising Guidance?

Seeing this many companies inside XLP lift their outlook, it is tempting to skip the basket entirely. If rising guidance is the signal, why not just own the companies actually raising it? We know what you are thinking, and it is an absolutely fair question.

You can, and the idea has real teeth. These are exactly the names our Guidance-Driven Momentum screen is built to surface, companies whose fresh revenue or earnings-per-share raises are already carrying their stock above both its 50-day and 200-day averages. Recent winners make the point: Texas Instruments (TXN) is up 24% since it raised guidance; West Pharmaceutical Services (WST) is up 17% since it raised its EPS outlook; Advanced Micro Devices (AMD) is up 41% since it raised guidance. A raise the market believes in tends to keep working.

But here is something you may not have weighed. First, timing and momentum are doing real work: a guidance raise only pays once the market agrees with management, which is exactly what a price holding above its moving averages confirms, and a raise the tape keeps shrugging off can be a value trap. Second, the companies raising guidance often cluster around the same tailwind, where a single theme like artificial intelligence can be lifting most of them at once, so a hand-picked basket of guidance-raisers can quietly become one concentrated bet.

One Way To Keep The Signal And Skip The Homework

None of that makes the idea wrong, it just means doing it well takes work: you have to judge the timing and manage the concentration yourself. If that is the part you would rather not run by hand, our High Quality (HQ) Portfolio is one way to keep the exposure without the homework. It holds 30 individually screened names spread deliberately across different kinds of businesses rather than one crowded theme, rule-based and rebalanced on a schedule, so it leans into improving fundamentals while trimming what has run and rotating out of names whose outlook is turning, never resting the whole thing on a single sector or a single quarter. It has a record of outpacing a benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000.