Pharma ETFs Gain On Healthy Q4 Earnings

Total earnings of 65.5% of the healthcare market capitalization that has reported so far are up 3.5% on revenue growth of 5.8%. Earnings and revenue beat ratios of 67.9% and 78.6%, respectively, also appear good.

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

Earnings in Focus

Johnson and Johnson

The world's biggest healthcare products maker continued its long streak of earnings beat. Earnings per share came in at $1.88, beating the Zacks Consensus Estimate by a couple of cents but declined 4.6% from the year-ago quarter. Revenues grew 1.7% year over year to $20.75 billion but marginally fell short of the consensus estimate of $20.79 billion. For 2020, Johnson & Johnson (NYSE:JNJ) projects revenues in the range of $85.4-$86.2 billion, indicating 4-5% year-over-year growth. Earnings per share are expected in the range of $8.95-$9.10, representing year-over-year growth of 3.1-4.8%.

Pfizer (NYSE:PFE)

Pfizer lagged the consensus mark on both fronts. Earnings per share of 55 cents lagged the Zacks Consensus Estimate by a couple of cents. Revenues of $12.69 billion also fell shy of the consensus mark of $12.7 billion. On a year-over-year basis, earnings and revenues declined 13% and 9%, respectively. For 2020, the U.S. drug giant expects revenues in the range of $48.5-$50.5 billion and earnings per share in the range of $2.82-$2.92 (read: Sector ETFs & Stocks to Gain/Lose on Coronavirus Outbreak).

Merck

Merck reported better-than-expected earnings but lagged on revenues. Earnings per share of $1.16 surpassed the Zacks Consensus Estimate of $1.14 and also improved 12% from the year-ago quarter. Revenues grew 8% year over year to $11.87 billion but fell short of the consensus mark of $12.14 billion. Merck expects revenues in the range of $48.8-$50.3 billion and earnings per share of $5.62-$5.77 for this year.

Bristol-Myers

Bristol-Myers’s earnings per share of $1.22 beat the Zacks Consensus Estimate by 34 cents and also rose from the year-ago figure of 94 cents. Revenues grew 33% year over year to $7.94 billion and also trumped the Zacks Consensus Estimate of $6.14 billion. The company provided revenues and earnings per share guidance of $40.5-$42.5 billion and $6.00-$6.20, respectively.

Eli Lilly (NYSE:LLY)

Eli Lilly also posted better-than-expected earnings and revenues. Earnings of $1.73 per share topped the Zacks Consensus Estimate by 21 cents and came in 21% higher than the year-ago quarter. Revenues grew 8% to $6.11 billion and edged past the estimated $6.07 billion. While Eli Lilly slightly raised its 2020 revenue projection to $23.7-$24.2 billion from $23.6-$24.1 billion, it maintained its earnings per share prediction of $6.70-$6.80.

ETF Angle

Strong results led to solid trading in pharma ETFs over the past week. Below, we have highlighted those in detail (see: all the Healthcare ETFs here).

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 54.1% of the total assets, suggesting heavy concentration. The product has $361.5 million in AUM and charges 42 basis points (bps) in fees and expense. Volume is light as it exchanges about 19,000 shares a day. The fund has added 4.4% in a week and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: 4 Sector ETFs Sizzling With Solid Buybacks).

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 37.3% of the assets. FTXH has a lower level of $7.2 million in AUM and 2,000 shares in average daily volume. It charges 60 bps in annual fees and is up 2.7% in the same time frame. The product has a Zacks ETF Rank #3.

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 $222.4 million, it trades in good volume of around 92,000 shares a day and charges 35 bps in fees a year. In total, the product holds 40 securities with the in-focus five firms making up for at least 4% share each. The product has gained 3.6% in the same period and has a Zacks ETF Rank #3 with a High risk outlook (read: Biotech Rally Sends Nasdaq to 9000: ETFs in Focus).

VanEck Vectors Pharmaceutical ETF (ASX: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 nearly 5% share each. The product has amassed $175.6 million in its asset base and trades in moderate volume of about 59,000 shares a day. Expense ratio is 0.36%. The fund has gained 3.1% in a week and has a Zacks ETF Rank #3 with a Medium 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 $377.3 million and sees a lower volume of around 34,000 shares a day. The fund charges 56 bps in fees and expenses. Holding 30 stocks, the fund invests nearly 5% share each in the five firms. The ETF has gained 4.4% in a week and has Zacks ETF Rank #3 with a High risk outlook.

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VanEck Vectors Pharmaceutical ETF (PPH): ETF Research Reports

Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports

SPDR S&P Pharmaceuticals ETF (XPH): ETF Research Reports

iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports

First Trust NASDAQ Pharmaceuticals ETF (FTXH): ETF Research Reports

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