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Pharma ETFs in Focus Post Q4 Earnings

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Sweta Killa
·6 min read
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Healthcare Q4 results seem robust given that it is the fourth-best sector from a revenue growth look and the sixth-strongest in terms of earnings growth. Total earnings of 66.5% for the healthcare market capitalization that has reported so far are up 8.5% on revenue growth of 11.4%. Earnings and revenue beat ratios of 76% and 84%, respectively, also appear robust (see: all the Healthcare ETFs here).

However, many industry bigwigs reported mixed results with some beating on earnings or revenues or both, while a few missed the estimates on both fronts. Many of them lifted the outlook for the full year. Let’s delve deeper into a few of them:

Earnings in Focus

Johnson and Johnson JNJ

The world's biggest healthcare products maker continued its long streak of earnings beat and outpaced revenue estimates. Earnings per share came in at $1.86, beating the Zacks Consensus Estimate of $1.81 and declining 1.1% from the year-ago quarter. Revenues grew 8.3% year over year to $22.5 billion and edged past the Zacks Consensus Estimate of $21.6 billion. For 2021, Johnson & Johnson expects revenues in the range of $90.5-$91.7 billion, indicating year-over-year increase of 9.5-11%, and earnings per share guidance of $9.40-$9.60, up 17.1-19.6% year over year (read: JNJ Touches New Highs Post Solid Q4 Earnings: ETFs in Focus).

Pfizer PFE

Pfizer missed the consensus mark on earnings but topped on revenues. Earnings per share of 42 cents were well above the Zacks Consensus Estimate of 46 cents. Revenues of $11.68 billion fell shy of the consensus mark of $11 billion. On a year-over-year basis, earnings and revenues increased 14% and 12%, respectively. The U.S. drug giant expects revenues in the range of $59.4-$61.4 billion, indicating year-over-year growth of 44%, for 2021 while raised its the earnings guidance to $3.10-$3.20 from $3.00-$3.10 per share (read: ETFs to Shine as Pfizer's COVID-19 Vaccine Gets a Nod in Europe).

Merck MRK

Merck reported weaker-than-expected results. Earnings per share of $1.32 missed the Zacks Consensus Estimate of $1.36 and improved 14% from the year-ago quarter. Revenues grew 5% year over year to $12.51 billion and were below the consensus mark of $12.59 billion. For 2021, Merck expects revenues in the range of $51.8-$53.8 billion while adjusted earnings are expected in the range of $6.48-$6.68 per share.

Bristol-Myers BMY

Bristol-Myers reported earnings per share of $1.46, 9 cents above the Zacks Consensus Estimate and higher than the year-ago earnings of $1.22. Revenues grew 39% year over year to $11.1 billion and edged past the Zacks Consensus Estimate of $10.6 billion. The company raised its earnings per share guidance to $7.35-$7.55 from $7.15-$7.45.

Eli Lilly LLY

Eli Lilly came up with solid results. Earnings of $2.75 per share outpaced the Zacks Consensus Estimate of $2.35 and increased 59% from the year-ago quarter. Revenues climbed 22% to $7.44 billion and came ahead of the estimated $7.23 billion. Eli Lilly maintained its 2021 revenue projection of $26.5-$28 billion and earnings per share guidance of $7.75-$8.40.

ETF Angle

The slew of Q4 results have led to mixed trading in pharma ETFs over the past 10 days. Below we have highlighted those in detail.

iShares U.S. Pharmaceuticals ETF IHE

This ETF provides exposure to 43 U.S. companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select Pharmaceuticals Index. The in-focus five firms are the top 10 holdings in the basket, accounting for a combined 53.1% of the total assets, suggesting heavy concentration. The product has $366.8 million in AUM and charges 42 bps in fees and expense. Volume is light as it exchanges about 9,000 shares a day. The fund has shed 1% in 10 days and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Invesco Dynamic Pharmaceuticals ETF PJP

This fund offers exposure to companies that are principally engaged in the research, development, manufacture, sale or distribution of pharmaceuticals and drugs of all types. It follows the Dynamic Pharmaceuticals Intellidex Index and holds 30 stocks in its basket with the in-focus five firms collectively making up for 5% share each. The product has AUM of about $376.9 million and sees a lower volume of around 19,000 shares a day. The fund charges 56 bps in fees and expenses. The ETF has gained 3.3% in 10 days and carries a Zacks ETF Rank #3 with a High risk outlook (read: ETFs to Tap AstraZeneca Mega-Deal to Buy Alexion).

SPDR S&P Pharmaceuticals ETF XPH

This fund provides exposure to pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With AUM of $290.1 million, it trades in a good volume of around 58,000 shares a day and charges 35 bps in fees a year. In total, the product holds 42 securities with the in-focus firms making up for at least 4% share each. It has gained 1.7% in the same period and has a Zacks ETF Rank #3 with a High risk outlook.

VanEck Vectors Pharmaceutical ETF 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 at least 5% share each. The product has amassed $249.9 million in its asset base and trades in a moderate volume of about 42,000 shares a day. Expense ratio is 0.35%. The fund has lost 1.1% in the last 10 days and has a Zacks ETF Rank #3 with a Medium risk outlook.

First Trust Nasdaq Pharmaceuticals ETF FTXH

This fund tracks the Nasdaq US Smart Pharmaceuticals Index, holding 27 securities in its basket. The in-focus firms account for a combined 35.7% of the assets. FTXH has a lower level of $21.1 million in AUM and 9,000 shares in an average daily volume. It charges 60 bps in annual fees and was down 0.1% in the same time frame. The product has a Zacks ETF Rank #3.

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