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Healthcare ETFs in Focus as Q2 Earnings Unfold

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·5 min read
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The healthcare sector has been benefiting from COVID-19 vaccines or treatment with many more to come. The ultra-popular ETFs, Health Care Select Sector SPDR Fund XLV, Vanguard Health Care ETF VHT, iShares U.S. Healthcare ETF IYH and Fidelity MSCI Health Care Index ETF FHLC, have gained around 5% over the past three months.

Better-than-expected earnings results from Johnson & Johnson JNJ and UnitedHealth Group UNH have added to the strength. The world's biggest healthcare products’ maker continued its long streak of earnings beat and outpaced revenue estimates. The company also lifted its full-year guidance. Meanwhile, UnitedHealth also breezed past the Zacks Consensus Estimate on both earnings and revenues. It also lifted the full-year earnings outlook as the spread of Delta variant coronavirus led to a rise in hospitalizations (read: UnitedHealth's Solid Q2 Earnings Put These ETFs in Focus).

Further price movement of these funds depend on earnings releases from some big names like Pfizer PFE, Merck MRK, Amgen AMGN, Thermo Fisher Scientific TMO, AbbVie ABBV, Bristol-Myers Squibb BMY and Gilead Sciences GILD that dominate returns. These firms are lined up to report their earnings in the next two weeks. All these stocks collectively account for 24.8% share in XLV, 22.8% in IYH, 20% in VHT and 20% in FHLC.

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 our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 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 #3 and an Earnings ESP of +2.51%. The stock witnessed no earnings estimate revision for the to-be-reported quarter over the past 30 days. It delivered an earnings surprise of 8.44%, on average, in the past four quarters and has a VGM Score of B. Pfizer is scheduled to report earnings on Jul 28, before the opening bell (read: Delta Variant to Spark Rally in Stay-At-Home ETFs).

Merck is expected to report results on Jul 29 before market open. It has a Zacks Rank #4 and an Earnings ESP of 0.00%. The stock witnessed negative earnings estimate revision of 17 cents over the past 30 days for the to-be-reported quarter. Additionally, the stock delivered an average beat of 5.99% in the last four quarters. Merck has a Value Score of B.

Amgen carries a Zacks Rank #3 and has an Earnings ESP of -4.49%. It witnessed positive earnings estimate revision of 3 cents over the past 30 days for the quarter to be reported. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The earnings surprise track over the past four quarters is strong, with the beat being 8.49%, on average. The stock has a VGM Score of A. Amgen will report earnings on Aug 3.

Thermo Fisher carries a Zacks Rank #3 and has an Earnings ESP of +2.69%. The earnings surprise track over the past four quarters is strong, with the beat being 21.41%, on average. However, the company has witnessed negative earnings estimate revision of 5 cents over the past 30 days for the quarter to be reported. The stock has a VGM Score of B. Amgen will report earnings on Jul 28.

AbbVie has a Zacks Rank #3 and an Earnings ESP of -0.33%. It saw negative earnings estimate revision of a couple of cents over the past month for the to-be-reported quarter and delivered an earnings surprise of 4.08%, on average, in the last four quarters. The stock has a VGM Score of A. The company is scheduled to report on Jul 30 before the opening bell.    

Bristol-Myers will likely report earnings on Jul 28 before the opening bell. It has a Zacks Rank #3 and an Earnings ESP of -0.88%. The stock delivered an earnings surprise of 6.07%, on average, over the past four quarters, but saw negative earnings estimate revision of 3 cents for the to-be-reported quarter in a month. It has a VGM Score of B.

Gilead is expected to release earnings on Jul 29 after market close. It has a Zacks Rank #3 and an Earnings ESP of -0.43%. The stock saw positive earnings estimate revision of a penny over the 7 days for the to-be-reported quarter. Gilead’s negative earnings surprise was 1.46%, on average, over the last four quarters. Gilead has a VGM Score of B (see: all the Healthcare ETFs here).

Summing Up

The healthcare sector is expected to witness substantial earnings growth of 16.7% in the second quarter. In particular, FHLC has a Zacks ETF Rank #3 while the remaining three have a Zacks ETF Rank #1.


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Bristol Myers Squibb Company (BMY) : Free Stock Analysis Report
 
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
 
Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
Amgen Inc. (AMGN) : Free Stock Analysis Report
 
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
 
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
 
AbbVie Inc. (ABBV) : Free Stock Analysis Report
 
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
 
iShares U.S. Healthcare ETF (IYH): ETF Research Reports
 
Vanguard Health Care ETF (VHT): ETF Research Reports
 
Fidelity MSCI Health Care Index ETF (FHLC): ETF Research Reports
 
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