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Healthcare ETFs in Focus as Q3 Earnings Unfold

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The healthcare sector got some boost from the approval of new COVID-19 vaccine boosters in the last quarter. 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 1% over the past three months.

Better-than-expected earnings from UnitedHealth Group UNH and mixed results from Johnson & Johnson JNJ also provided some support. UnitedHealth breezed past the Zacks Consensus Estimate on both earnings and revenues and lifted the full-year earnings outlook. Meanwhile, the world's biggest healthcare products’ maker continued its long streak of earnings beat but lagged the revenue estimates. The company lifted its full-year guidance (read: JNJ Posts Mixed Q3 Bag, Ups View: ETFs in Focus).

Eli Lilly LLY missed the Zacks Consensus Estimate but outpaced on the revenue front. It also raised its earnings outlook for the full year.

Further price movement of these funds depend on earnings releases from some big names like Pfizer PFE, Merck MRK, Amgen AMGN, AbbVie ABBV 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 16.8% share in XLV, 15.7% in IYH, 14% in VHT and 14% 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 +2.25%. The stock witnessed negative earnings estimate revision of four cents for the to-be-reported quarter over the past 30 days. It delivered an earnings surprise of 5.55%, on average, in the past four quarters and has a VGM Score of A. Pfizer is scheduled to report earnings on Nov 2, before the opening bell.

Merck is expected to report results on Oct 28 before market open. It has a Zacks Rank #3 and an Earnings ESP of +2.64%. The stock witnessed no earnings estimate revision over the past 30 days for the to-be-reported quarter. Additionally, the stock delivered an average beat of 0.57% in the last four quarters. Merck has a Value Score of B (read: Buy 5 High-Beta ETFs That Still Offer Value).

Amgen carries a Zacks Rank #3 and has an Earnings ESP of -0.31%. It witnessed negative earnings estimate revision of a penny over the past 30 days for the quarter to be reported. The earnings surprise track over the past four quarters is strong, with the beat being 7.12%, on average. The stock has a Value Score of A. Amgen will report earnings on Nov 2.

AbbVie has a Zacks Rank #4 and an Earnings ESP of -0.26%. It saw positive earnings estimate revision of 17 cents over the past seven days for the to-be-reported quarter and delivered an earnings surprise of 0.55%, on average, in the last four quarters. The stock has a VGM Score of B. The company is scheduled to report on Oct 29 before the opening bell.    

Gilead is expected to release earnings on Oct 28 after market close. It has a Zacks Rank #3 and an Earnings ESP of +0.75%. The stock saw positive earnings estimate revision of seven cents over the 30 days for the to-be-reported quarter. Gilead’s earnings surprise was 6.10%, on average, over the last four quarters. Gilead has a VGM Score of A (see: all the Healthcare ETFs here).

Summing Up

The healthcare sector is expected to witness substantial earnings growth of 17.5% in the third quarter. In particular, FHLC has a Zacks ETF Rank #3 while the remaining three have a Zacks ETF Rank #1.


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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
 
Eli Lilly and Company (LLY) : Free Stock Analysis Report
 
Amgen Inc. (AMGN) : Free Stock Analysis Report
 
Gilead Sciences, Inc. (GILD) : 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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Zacks Investment Research

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