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Healthcare ETFs in Focus Ahead of Q4 Earnings

Sweta Killa
General Electric's (GE) first-quarter 2019 results are likely to gain from strength in aviation and renewable energy businesses, and efforts to lower debts. Weak Power segment remains a concern.

Healthcare has been gathering enough investors’ interest driven by its non-cyclical nature, which provides a defensive tilt to the portfolio in a turbulent market.

The Health Care Select Sector SPDR Fund XLV hasgained 3.4% in the year-to-date timeframe, while Vanguard Health Care ETF VHT, iShares U.S. Healthcare ETF IYH and Fidelity MSCI Health Care Index ETF FHLC are up more than 4% each. The strength is likely to continue with some big names like Pfizer PFE, Merck MRK, Amgen AMGN, AbbVie ABBV, and Gilead Sciences GILD lined up to report this week and in the next. All these stocks collectively account for 23.3% share in XLV, 21.7% in IYH, 21.3% in VHT and 20.3% in FHLC (read: Top-Ranked Sector ETFs & Stocks to Buy for 2019).

Let’s dig deeper into the earnings picture of these companies, which will drive the performance of the above-mentioned funds in the coming days:

According to the our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while Zacks Rank #4 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Surprise Prediction for These Stocks

Pfizer has a Zacks Rank #4 and an Earnings ESP of 0.00%. The stock saw negative earnings estimate revision of a penny for to-be-reported quarter over the past 30 days. It delivered an average positive earnings surprise of 6.35% for the past four quarters. It has a VGM Score of D. Pfizer is scheduled to report earnings on Jan 29, before the opening bell.

Merck is expected to report results on Feb 1 before market open. It has a Zacks Rank #3 and an Earnings ESP of 0.00%. The stock delivered a positive earnings surprise in the last four quarters, with the average beat being 3.96%. However, it has witnessed negative earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter. Merck has a VGM Score of D.

Amgen carries a Zacks Rank #3 and has an Earnings ESP of -0.28%, indicating lower chance of beating estimates this quarter. The earnings surprise track over the past four quarters is strong, with the average positive surprise being 4.80%. Amgen has witnessed no earnings estimate revision over the past 30 days for the quarter to be reported. The stock has a solid VGM Score of B. Amgen will report earnings on Jan 29 after market close.

AbbVie has a Zacks Rank #3 and an Earnings ESP of +1.07%, indicating a reasonable chance of beating estimates this quarter. The company delivered a positive earnings surprise in the last four quarters, with the average beat being 3.54%. It has seen positive earnings estimate revision of a penny over the past month for the to-be-reported quarter. The stock has a solid VGM Score of B. The company is scheduled to report on Jan 25 before the opening bell (read: JNJ Beats, Offers Bleak Outlook: Health Care ETFs in Focus).    

Gilead is expected to release earnings on Feb 4 after market close. It has a Zacks Rank #4 and an Earnings ESP of -4.72%. Gilead delivered average positive earnings surprise of 6.99% over the last four quarters and saw no earnings estimate revision over the past month for the to-be-reported quarter. It has a VGM Score of D.

Summing Up

With lower negative earnings revisions, the healthcare sector is expected to witness earnings growth of 7.7% in the fourth quarter, suggesting continued outperformance for healthcare ETFs. In particular, all the four ETFs have a Zacks ETF Rank #1 (Strong Buy) or #2 (Buy) (see: all the Healthcare ETFs here).

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Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
iShares U.S. Healthcare ETF (IYH): ETF Research Reports
 
Health Care Select Sector SPDR Fund (XLV): ETF Research Reports
 
Vanguard Health Care ETF (VHT): ETF Research Reports
 
Fidelity MSCI Health Care Index ETF (FHLC): ETF Research Reports
 
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
 
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