Pharma ETFs in Focus Post Q2 Earnings
Second-quarter earnings for the healthcare sector have been unimpressive, with earnings of companies that have reported so far down 30.7% on 5% revenue growth. However, the earnings beat ratio of 86.6% and revenue beat ratio of 84.9% are impressive. Combining the actual results with the estimates for the still-to-report companies, total earnings for the sector are expected to decline 30% despite revenue growth of 5.4%.
Many industry bigwigs reported solid results, with some beating on earnings or revenues or both. As such, pharma ETFs have been in the green over the past month. VanEck Vectors Pharmaceutical ETF PPH, iShares U.S. Pharmaceuticals ETF IHE, Invesco Dynamic Pharmaceuticals ETF PJP, SPDR S&P Pharmaceuticals ETF XPH and First Trust Nasdaq Pharmaceuticals ETF FTXH have gained 8.3%, 9.1%, 8%, 8.3% and 5.2%, respectively, in a month.
Let’s delve deeper into the earnings of some of the bigwigs:
Earnings in Focus
Johnson and Johnson
Johnson & Johnson JNJ continued with its long streak of earnings beat. It topped revenue estimates as well as lifted the full-year outlook. Earnings per share came in at $2.80, beating the Zacks Consensus Estimate of $2.61 and improving 8.1% from the year-ago quarter. Revenues grew 6.3% year over year to $25.5 billion and edged past the Zacks Consensus Estimate of $24.7 billion. For 2023, Johnson & Johnson lifted the revenue guidance to $98.80-$99.80 billion from the previous outlook of $97.9-$98.9 billion. It also raised the earnings per share guidance to $10.70-$10.80 from the previous outlook of $10.60-$10.70 (read: 5 ETFs to Buy on JNJ's Q2 Earnings Strength).
Pfizer
Pfizer PFE topped earnings estimates but missed on revenues. Earnings per share of 67 cents were well above the Zacks Consensus Estimate of 56 cents. Revenues of $12.73 billion fell short of the consensus mark of $13.17 billion. On a year-over-year basis, earnings and revenues declined 67% and 54%, respectively. The U.S. drug giant narrowed its revenue guidance to $67-$70.0 billion from $67-$71.0 billion while maintaining its adjusted earnings per share guidance in the range of $3.25-$3.45.
Merck
Merck MRK reported better-than-expected results. Loss per share of $2.06 was narrower than the Zacks Consensus Estimate of a loss of $2.17. In the year-ago period, the company reported adjusted earnings of $1.87. Revenues rose 3% year over year to $15.04 billion and came in above the consensus mark of $14.39 billion. Merck lifted its 2023 revenue outlook to $58.6-$59.6 billion from the previous guidance of $57.7-$58.9 billion. It maintained earnings per share guidance in the $6.88-$7.00 range.
Bristol-Myers
Bristol-Myers BMY reported disappointing results. It posted earnings per share of $1.75, which missed the Zacks Consensus Estimate of $1.99 but improved from the year-ago earnings of $1.96. Revenues declined 6% year over year to $11.23 billion and fell short of the Zacks Consensus Estimate of $11.8 billion. Bristol-Myers lowered its 2023 guidance. It expects adjusted earnings per share in the range of $7.35-$7.65 versus the previous projection of $7.95-$8.25. Revenues are expected to decrease in low single digits compared to the previous guidance of approximately 2% increase.
Eli Lilly and Company
Eli Lilly and Company LLY topped estimates on both fronts. Earnings per share came in at $2.11, above the Zacks Consensus Estimate of $1.98 and 69% higher year over year. Revenues rose 28% to $8.31 billion and edged past the estimate of $7.55 billion. Eli Lilly raised its full-year revenue and earnings guidance. Revenues are expected in the range of $33.4 billion to $33.9 billion, up from its previous outlook of $31.2 billion to $31.7 billion. The earnings per share guidance has been raised to 9.70-$9.90 from $8.65-$8.85 (read: Eli Lilly Soars on Blockbuster Q2 Earnings: ETFs to Tap).
ETF Angle
VanEck Vectors Pharmaceutical ETF (PPH)
VanEck Vectors Pharmaceutical ETF follows the MVIS US Listed Pharmaceutical 25 Index and holds 25 stocks in its basket. The five firms collectively account for around 24% share. The product has amassed $415.9 million in its asset base and trades in a good volume of about 124,000 shares a day. The expense ratio is 0.36%.
VanEck Vectors Pharmaceutical ETF carries a Zacks ETF Rank #4 (Sell) with a Medium risk outlook.
iShares U.S. Pharmaceuticals ETF (IHE)
iShares U.S. Pharmaceuticals ETF provides exposure to 39 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 holdings in the basket, accounting for a combined 59.5% of the total assets, suggesting heavy concentration (see: all the Healthcare ETFs here).
iShares U.S. Pharmaceuticals ETF has $389.3 million in AUM and charges 40 bps in fees and expense. Volume is light as it exchanges about 6,000 shares a day. The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Invesco Dynamic Pharmaceuticals ETF (PJP)
Invesco Dynamic Pharmaceuticals ETF 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 23 stocks in its basket, with the in-focus firms making up nearly 5-7% share each.
Invesco Dynamic Pharmaceuticals ETF has AUM of about $301 million and sees a lower volume of around 13,000 shares a day. The fund charges 56 bps in fees and expenses. The ETF has a Zacks ETF Rank #4 with a High risk outlook.
SPDR S&P Pharmaceuticals ETF (XPH)
SPDR S&P Pharmaceuticals ETF provides exposure to pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With AUM of $228.8 million, it trades in a moderate volume of around 30,000 shares a day and charges 35 bps in fees a year.
SPDR S&P Pharmaceuticals ETF holds 37 securities, with the in-focus firms making up for about 21% share combined. It has a Zacks ETF Rank #4 with a High risk outlook.
First Trust Nasdaq Pharmaceuticals ETF (FTXH)
First Trust Nasdaq Pharmaceuticals ETF tracks the Nasdaq US Smart Pharmaceuticals Index, holding 45 securities in its basket. The in-focus four firms account for a combined 33.9% of the assets. FTXH has a lower level of $22.8 million in AUM and an average daily volume of 16,000 shares.
First Trust Nasdaq Pharmaceuticals ETF charges 60 bps in annual fees and has a Zacks ETF Rank #4.
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Free: See Our Top Stock and 4 Runners Up >>Bristol Myers Squibb Company (BMY) : 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
Eli Lilly and Company (LLY) : Free Stock Analysis Report
Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
SPDR S&P Pharmaceuticals ETF (XPH): ETF Research Reports
VanEck Pharmaceutical ETF (PPH): ETF Research Reports
First Trust NASDAQ Pharmaceuticals ETF (FTXH): ETF Research Reports
