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A Look at Pharma ETFs Post Q4 Earnings

The Q4 earnings picture for the healthcare sector seems good, with results from companies that have reported so far up 3.6% on 7.6% revenue growth. Both earnings and revenue beat ratios of 81.3% and 62.5%, respectively, also seem impressive. Combining the actual results with the estimates for the still-to-report companies, total earnings for the sector are expected to decline 9% on revenue growth of 4.3% (see: all the Healthcare ETFs here).

Many industry bigwigs reported solid results, with some beating on earnings or revenues or both. However, solid earnings failed to fully impress pharma ETFs 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 are modestly up to down 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 its long streak of earnings beat while missed the revenue estimate. Earnings per share came in at $2.35, beating the Zacks Consensus Estimate of $2.22 and improving 10% from the year-ago quarter. Revenues declined 4.4% year over year to $23.7 billion and fell short of the Zacks Consensus Estimate of $23.72 billion. For 2023, the world's biggest healthcare products’ maker expects revenues in the range of $96.9 billion to $97.9 billion and earnings per share of $10.45 to $10.65 (read: ETFs in Focus on JNJ's Mixed Q4 Earnings Results).

Pfizer

Pfizer PFE topped on both earnings and revenues. Earnings per share of $1.14 were well above the Zacks Consensus Estimate of $1.01. Revenues of $24.3 billion edged past the consensus mark of $24.20 billion. On a year-over-year basis, earnings increased 45% and revenues rose 2%, respectively. The U.S. drug giant issued weaker guidance for 2023. Revenues are expected in the range of $67-$71.0 billion, indicating a decline of 29-33% from the 2022 level.

Merck

Merck MRK also reported better-than-expected results. Earnings per share of $1.62 outpaced the Zacks Consensus Estimate of $1.56 but declined 10% from the year-ago quarter. Revenues rose 2% year over year to $13.83 billion and came in above the consensus mark of $13.74 billion. For 2023, Merck issued a fresh earnings and sales outlook for 2023. It expects revenues in the range of $57.2-$58.7 billion and earnings per share in the range of $6.80-$6.95.

Bristol-Myers

Bristol-Myers BMY reported earnings per share of $1.82, beating the Zacks Consensus Estimate of $1.71 and improving from the year-ago earnings of $1.84. Revenues declined 5% year over year to $11.41 billion and edged past the Zacks Consensus Estimate of $11.14 billion. Bristol-Myers expects adjusted earnings per share of $7.95-$8.25 for 2023.

Eli Lilly

Eli Lilly LLY came up with robust results. Earnings of $2.09 per share outpaced the Zacks Consensus Estimate of $1.83 but were 4% lower than year-ago earnings. Revenues declined 9% year over year to $7.30 billion and missed the estimate of $7.32 billion. Eli Lilly reiterated its revenue guidance in the range of $30.3-$30.8 billion in 2023 and lifted the earnings per share guidance to a record $8.35-$855 from $8.10-$8.30.

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 27% share. The product has amassed $463.4 million in its asset base and trades in a good volume of about 83,000 shares a day. The expense ratio is 0.36%.

VanEck Vectors Pharmaceutical ETF carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

iShares U.S. Pharmaceuticals ETF (IHE)

iShares U.S. Pharmaceuticals ETF provides exposure to 42 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 50.4% of the total assets, suggesting heavy concentration.

iShares U.S. Pharmaceuticals ETF has $417.7 million in AUM and charges 39 bps in fees and expense. Volume is light as it exchanges about 8,000 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 24 stocks in its basket, with the in-focus firms making up for nearly 5-6% share each.

Invesco Dynamic Pharmaceuticals ETF has AUM of about $326.9 million and sees a lower volume of around 9,000 shares a day. The fund charges 56 bps in fees and expenses. The ETF has a Zacks ETF Rank #3 with a High risk outlook (read: Amgen to Buy Horizon Therapeutics: ETFs to Bet On).

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 $210.3 million, it trades in a moderate volume of around 42,000 shares a day and charges 35 bps in fees a year.

SPDR S&P Pharmaceuticals ETF holds 41 securities, with the in-focus firms making up for nearly 4% share each. It has a Zacks ETF Rank #3 with a High risk outlook.

First Trust Nasdaq Pharmaceuticals ETF (FTXH)

First Trust Nasdaq Pharmaceuticals ETF tracks the Nasdaq US Smart Pharmaceuticals Index, holding 29 securities in its basket. The in-focus five firms account for a combined 27.9% of the assets. FTXH has a lower level of $42.4 million in AUM and an average daily volume of 123,000 shares.

First Trust Nasdaq Pharmaceuticals ETF charges 60 bps in annual fees and has a Zacks ETF Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

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