A Look at Pharma ETFs Post Q4 Results

Total earnings of 90% of the total healthcare market capitalization that has reported so far are up 11.7% on revenue growth of 8.6%. The growth rates seem impressive when compared with some of the other sectors. Earnings and revenue beat ratios of 71.8% and 79.5%, respectively, also appear good.

Most of the industry bigwigs came up with solid results either beating earnings or revenue estimates or both but offered bleak outlook. Let’s delve into some of them:

Earnings in Focus

Johnson and Johnson

The world's biggest maker of healthcare products continued its long streak of earnings beat. Earnings per share came in at $1.97, a couple of cents ahead of the Zacks Consensus Estimate and 13.2% higher than the year-ago quarter. Revenues inched up 1% year over year to $20.39 billion and edged past the Zacks Consensus Estimate of $20.1 billion. However, Johnson & Johnson offered a downbeat outlook for 2019. Revenues are expected in the range of $80.4-$81.2 billion, flat to up 1%, while earnings per share will likely range between $8.50 and $8.65, indicating growth of 5.7-7.6% (read: JNJ Beats, Offers Bleak Outlook: Health Care ETFs in Focus).

Pfizer

Earnings per share of 64 cents came in a penny above the Zacks Consensus Estimate and revenues of $13.98 billion were ahead of the estimated $13.74 billion. On an annual basis, earnings per share and revenues rose 3% and 2%, respectively. For 2019, the U.S. drug giant guides revenues in the range of $52-$54 billion and earnings per share in the range of $2.82-$2.92.

Merck

Earnings per share came in at $1.04, surpassing the Zacks Consensus Estimate by a penny and improving 6% from the year-ago quarter. Revenues grew 5% year over year to $11 billion, edging past the estimated $10.93 billion. Merck expects revenue in the range of $43.2-$44.7 billion for this year and earnings per share of $4.57-$4.72.

Bristol-Myers

Bristol-Myers reported earnings per share of 94 cents, 9 cents above the Zacks Consensus Estimate and higher than the year-ago earnings of 68 cents. Revenues grew 10% year over year to $5.97 billion but slightly fell short of the Zacks Consensus Estimate of $5.98 billion. The company reiterated its earnings per share guidance of $4.10-$4.20 and revenue growth expectation in mid-single digits (read: Bristol-Myers to Acquire Celgene: Healthcare ETFs in Focus).

Eli Lilly

Eli Lilly missed earnings estimates but beat the same on revenues. Earnings of $1.33 per share were 3 cents lower than the Zacks Consensus Estimate but came in 17% higher than the year-ago quarter. Revenues grew 5% to $6.44 billion and beat the estimated $6.34 billion. Eli Lilly reduced its 2019 revenue guidance to $25.1-$25.6 billion from $25.3-$25.8 billion and earnings guidance to $5.55-$5.65 from $5.90-$6.00.

ETF Angle

The strong results but downbeat guidance led to decent returns in the pharma ETFs over the past month. Below we have highlighted them in detail. These funds have a Zacks ETF Rank #2 (Buy), suggesting a continuation of their outperformance (see: all the Healthcare ETFs here).

iShares U.S. Pharmaceuticals ETF IHE

This ETF provides exposure to 46 pharma stocks by tracking the Dow Jones U.S. Select Pharmaceuticals Index. The in-focus firms are the top five holdings in the basket, accounting for a combined 45% of total assets, suggesting heavy concentration. The product has $393.5 million in AUM and charges 43 bps in fees and expense. Volume is light as it exchanges about 20,000 shares a day. The fund has gained 2% in a month.

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 $248.2 million, it trades in good volume of around 105,000 shares a day and charges 35 bps in fees a year. In total, the product holds 44 securities with the in-focus five firms making up for at least 4% share each. The product is up 4.6% in the same period (read: 5 Incredible ETFs & Stocks to Buy on the Dip).

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 four firms account for more than 4% share each. The product has amassed $220.2 million in its asset base and trades in moderate volume of about 53,000 shares a day. Expense ratio comes in at 0.36%. The fund has gained 4.2% in a month.

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 $471.1 million and sees lower volume of around 37,000 shares a day. The fund charges 57 bps in fees and expenses. Holding 30 stocks, the fund invests 2.8% in BMY and nearly 5% share each in the remaining four firms. The ETF has added 0.3% in a month.

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 35% of assets. FTXH has a lower level of $4.1 million in AUM and 3,000 shares in average daily volume. It charges 60 bps in annual fees and is up 3.3% in the same time frame.

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iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
 
VanEck Vectors Pharmaceutical ETF (PPH): ETF Research Reports
 
SPDR S&P Pharmaceuticals ETF (XPH): ETF Research Reports
 
First Trust NASDAQ Pharmaceuticals ETF (FTXH): ETF Research Reports
 
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