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Pharma ETFs Gain on Healthy Q4 Earnings

Sweta Killa
·6 min read
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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 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

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

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 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 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 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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