Pharma ETFs Down Despite Solid Q1 Results

Total earnings of 92.8% of the entire healthcare market capitalization reported so far are up 8.1% on revenue growth of 6.8%. The growth rates seem impressive when compared with some of the other sectors. Earnings and revenue beat ratios of 85.4% and 70.8%, respectively, also appear strong (read: Play Strong Earnings Beat With These Top-Ranked Sector ETFs).

Most industry bigwigs delivered encouraging results, either beating on earnings or revenue or both and also raised revenue or earnings outlook or both. Let’s delve into a few of them:

Earnings in Focus

Johnson and Johnson

The world's biggest maker of healthcare products continued with its long streak of earnings beat and also outpaced revenue estimates. Earnings per share came in at $2.10, ahead of the Zacks Consensus Estimate by 7 cents and also 1.9% higher than the year-ago quarter. Revenues inched up 3.9% year over year to $20.02 billion and edged past the Zacks Consensus Estimate of $19.63 billion. Though Johnson & Johnson (NYSE:JNJ) lifted the guidance for full-year sales growth to 2.5-3.5% from 2-3%, it narrowed its earnings per share outlook to $8.53-$8.63 from the $8.50-$8.65 range (read: JNJ Beats, Ups Sales Growth View: Healthcare ETFs in Focus).

Pfizer (NYSE:PFE)

Earnings per share of 85 cents were 8 cents above the Zacks Consensus Estimate and revenues of $13.12 billion also exceeded the consensus estimate of $12.80 billion. On an annual basis, earnings per share and revenues rose 13% and 2%, respectively. For 2019, the U.S. drug giant continues to expect revenues in the band of $52-$54 billion while it raised its earnings per share from $2.82-$2.92 to $2.83-$2.93.

Merck

Earnings per share of $1.22 surpassed the Zacks Consensus Estimate of $1.05 and also improved 16% from the year-ago quarter. Moreover, revenues grew 8% year over year to $10.8 billion, edging past the consensus mark of $10.32 billion. Merck increased its revenue projection from $43.2-$44.7 billion to $43.9-$45.1 billion for this year and earnings per share view from $4.57-$4.72 to $4.67-$4.79.

Bristol-Myers

Bristol-Myers reported earnings per share of $1.10, beating the Zacks Consensus Estimate by a penny and also rose from the year-ago earnings of 94 cents. Revenues grew 14% year over year to $5.92 billion and also trumped the Zacks Consensus Estimate of $5.80 billion. The company reiterated its earnings per share guidance of $4.10-$4.20 and the revenue growth expectation in mid-single digits (read: Biotech ETFs in Focus on String of Q1 Earnings Beats).

Eli Lilly (NYSE:LLY)

Eli Lilly also delivered better-than expected earnings as well as revenues. Earnings of $1.33 per share were a penny ahead of the Zacks Consensus Estimate and came in 2% higher than the year-earlier quarter. Revenues grew 3% to $5.1 billion. While Eli Lilly lowered its 2019 revenue guidance to $22-$22.5 billion from $25.1-$25.6 billion, it raised its earnings prediction to $5.60-$5.70 from $5.55-$5.65.

ETF Angle

Despite such robust results, pharma ETFs have been trending downward in a month. Below, we have highlighted those in detail.

iShares U.S. Pharmaceuticals ETF IHE

This ETF provides exposure to 45 pharma stocks by tracking the Dow Jones U.S. Select Pharmaceuticals Index. The in-focus firms are the top 10 holdings in the basket, accounting for a combined 55.4% of total assets, suggesting heavy concentration. The product has $393.5-354.4 million in AUM and charges 43 bps in fees and expense. Volume is light as it exchanges about 15,000 shares a day. The fund has lost 3.1% in a month and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

SPDR S&P Pharmaceuticals ETF (HN:XPH)

This fund provides exposure to pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With AUM of $233.7 million, it trades in good volume of around 73,000 shares a day and charges 35 bps in fees a year. In total, the product holds 41 securities with the in-focus five firms making up for at least 4% share each. The product is down 4.5% in the same period and has a Zacks ETF Rank of 3 with a High risk outlook (see: all the Healthcare ETFs here).

VanEck Vectors Pharmaceutical ETF (AX:PPH)

This ETF follows the MVIS US Listed Pharmaceutical 25 Index and holds 25 stocks in its basket. The in-focus five firms account for a combined 23.8% share. The product has amassed $178.7 million in its asset base and trades in moderate volume of about 53,000 shares a day. Expense ratio comes in at 0.36%. The fund has shed 3.2% of value in a month and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

Invesco Dynamic Pharmaceuticals ETF (WA:PJP)

This is by far the most-popular choice in the pharma space that follows the Dynamic Pharmaceuticals Intellidex Index. The product has AUM of about $415.9 million and sees a lower volume of around 32,000 shares a day. The fund charges 57 bps in fees and expenses. Holding 30 stocks, the fund invests nearly 5% share each in the five firms. The ETF has declined 4% in a month and is a Zacks #3 Ranked ETF with a High risk outlook.

First Trust Nasdaq Pharmaceuticals ETF FTXH

This fund tracks the Nasdaq US Smart Pharmaceuticals Index, holding 30 securities in its basket. The in-focus firms account for a combined 31.7% of assets. FTXH has a lower level of $6.2 million in AUM and 3,000 shares in average daily volume. It charges 60 bps in annual fees and is down 3.2% in the same time frame. The product has a Zacks ETF Rank of 2.

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