The U.S. largest drug maker Pfizer (
) disappointed investors with its first quarter 2014 results
yesterday. While earnings were encouraging, lower-than expected
revenues and the rejected AstraZeneca (
) acquisition bid pushed PFE shares down nearly 2.6%.
Pfizer Earnings in Focus
Earnings per share came in at 57 cents, a couple of cents ahead of
the Zacks Consensus Estimate and 11.8% above the year-ago earnings.
Revenues dropped 9% year over year to $11.35 billion, missing the
Zacks Consensus Estimate of $12.0 billion by a wide margin thanks
to expiring patents and rising competition from generic drugs.
For 2014, Pfizer reiterated its $49.2-$51.2 billion revenue
guidance and $2.20-$2.30 earnings per share forecast. Both are
above the Zacks Consensus Estimate of $48.9 billion and $2.24,
respectively, reflecting bullishness for this company (read:
Pharma ETFs: A Safe Haven from the Biotech Stock
AstraZeneca Offer in Focus
The company is making continued efforts to acquire the
second-largest British drug maker AstraZeneca, which has a robust
line of cancer and cardiovascular therapies, since January this
Last week, the company made a revised offer and raised its bid for
AstraZeneca to about $106 billion. But AstraZeneca rejected the
proposal for the third time, citing the bids as too low and
undervaluing the company. Pfizer nevertheless continued to review
other options and will soon come up with new proposal.
ETFs in Focus
Though Pfizer was down on the day, an optimistic guidance could
provide support to the stock price in the coming days. This is
especially true as the stock has a decent Zacks Rank of #3 (Hold),
suggesting some room for upside. Further, if the AstraZeneca deal
goes through, the potential merger would be accretive to Pfizer's
earnings (in the first full year following the merger) and
accelerate its earnings growth pace.
Given this, the healthcare ETFs having largest allocation to this
drug maker would be in focus in the days ahead. These funds have
not felt the pain and were modestly up on the day. Investors should
closely monitor the movement in these funds and could catch the
opportunity from any surge in the PFE share price (see:
all the Healthcare ETFs here
iShares U.S. Pharmaceuticals ETF (
This ETF provides exposure to the pharmaceutical corner of the
broad healthcare world by tracking the Dow Jones U.S. Select
Pharmaceuticals Index. The fund holds 39 stocks in its basket with
Pfizer taking the second position at 10.24%.
The product has $664.8 million in AUM and charges 45 bps in fees
and expense. Volume is light as it exchanges about 34,000 shares a
day. The fund has added 10.11% so far this year and has a Zacks ETF
Rank of 2 or 'Buy' rating with a 'Medium' risk outlook (read:
3 Pharma ETFs Beating the Market
Health Care Select Sector SPDR Fund (
The most popular healthcare ETF on the market, XLV follows the
S&P Health Care Select Sector Index. This fund manages about
$9.4 billion in its asset base and trades in heavy volume of around
8.5 million. Expense ratio came in at 0.16% annually. In total, the
fund holds about 56 securities in its basket. Of these firms, PFE
takes the second spot, making up roughly 8.84% of the assets.
Pharma accounts for 47% share from a sector look while biotech,
healthcare providers and services, and equipment and suppliers make
up for double-digit exposure. The fund gained nearly 5.2% in the
year-to-date time frame and has a Zacks ETF Rank of 3 or 'Hold'
rating with a 'Medium' risk outlook.
iShares U.S. Healthcare ETF (
This fund provides exposure to 111 securities by tracking the Dow
Jones U.S. Health Care Index. Here again, Pfizer is the second
holding accounting for 8.32% of total assets. In terms of
industrial exposure, Pharma takes the top spot at 49%, closely
followed by biotech (20%), medical equipment (17%) and healthcare
services (14%) (read:
Merck (MRK) Earnings Beat Puts Healthcare ETFs in
The product has amassed nearly $2.7 billion in its asset base while
charges 45 bps in annual fees. It trades in good volume of around
241,000 shares a day, suggesting a relatively tight bid/ask spread.
IYH is up 5.28% year-to-date and has a Zacks ETF Rank of 3 with a
'Medium' risk outlook.
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ISHARS-US PHARM (IHE): ETF Research Reports
ISHARS-US HLTHC (IYH): ETF Research Reports
PFIZER INC (PFE): Free Stock Analysis Report
SPDR-HLTH CR (XLV): ETF Research Reports
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