First-quarter earnings for the healthcare sector have deteriorated, with results from companies that have reported so far down 14.4% on 4.5% revenue growth. However, earnings and revenue beat ratios of 82.1% and 84.6%, respectively, seem impressive. Combining the actual results with the estimates for the still-to-report companies, total earnings for the sector are expected to decline 19.2% on revenue growth of 3.5% (see: all the Healthcare ETFs here).
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 2.4%, 3.5%, 1.1%, 4% and 2.1%, 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 and topped revenue estimates. Earnings per share came in at $2.68, beating the Zacks Consensus Estimate of $2.51 and improving 0.4% from the year-ago quarter. Revenues grew 5.6% year over year to $24.7 billion and edged past the Zacks Consensus Estimate of $23.57 billion. For 2023, Johnson & Johnson lifted the revenue guidance to $97.9-$98.9 billion from the previous outlook of $96.9-$97.9 billion. It also raised the earnings per share guidance to $10.60-$10.70 from the previous outlook of $10.45-$10.65 (read: ETFs to Buy on Solid Q1 JNJ Earnings Results).
Pfizer (PFE) topped on both earnings and revenues. Earnings per share of $1.23 were well above the Zacks Consensus Estimate of $1.00. Revenues of $18.28 billion edged past the consensus mark of $16.96 billion. On a year-over-year basis, earnings and revenues declined 24% and 29%, respectively. The U.S. drug giant maintained its 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 (MRK) also reported better-than-expected results. Earnings per share of $1.40 outpaced the Zacks Consensus Estimate of $1.34 but declined 35% from the year-ago quarter. Revenues declined 9% year over year to $14.49 billion and came in above the consensus mark of $13.84 billion. For 2023, Merck lifted its earnings and sales outlook for 2023. It expects revenues in the range of $57.7-$58.9 billion, up from previous guidance of $57.2-$58.7 billion and earnings per share in the range of $6.88-$7.00, up from $6.80-$6.95.
Bristol-Myers (BMY) reported earnings per share of $2.05, beating the Zacks Consensus Estimate of $1.98 and improving from the year-ago earnings of $1.96. Revenues declined 3% year over year to $11.34 billion and fell short of the Zacks Consensus Estimate of $11.61 billion. Bristol-Myers expects adjusted earnings per share of $7.95-$8.25 for 2023.
Eli Lilly (LLY) came up with mixed results. Earnings of $1.62 per share missed the Zacks Consensus Estimate of $1.73 but were 38% lower than the year-ago earnings. Revenues declined 11% year over year to $6.96 billion and beat the estimate of $6.81 billion. Eli Lilly raised its revenue guidance from $30.3-$30.8 billion to $31.2-$31.7 billion in 2023 and earnings per share guidance to a record $8.65-$8.85 from $8.35-$8.55.
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 29% share. The product has amassed $404 million in its asset base and trades in a good volume of about 128,000 shares a day. The expense ratio is 0.36%.
VanEck Vectors Pharmaceutical ETF carries a Zacks ETF Rank #3 (Hold) 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 58.1% of the total assets, suggesting heavy concentration (read: Low Volatility ETFs to Play Stock Market Volatility).
iShares U.S. Pharmaceuticals ETF has $390 million in AUM and charges 39 bps in fees and expense. Volume is light as it exchanges about 5,000 shares a day. The fund carries a Zacks ETF Rank #4 (Sell) 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 25 stocks in its basket, with the in-focus firms making up for nearly 5-7% share each.
Invesco Dynamic Pharmaceuticals ETF has AUM of about $304.3 million and sees a lower volume of around 10,000 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 $242.7 million, it trades in a moderate volume of around 55,000 shares a day and charges 35 bps in fees a year.
SPDR S&P Pharmaceuticals ETF holds 39 securities, with the in-focus firms making up for about 23% 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 49 securities in its basket. The in-focus five firms account for a combined 33.4% of the assets. FTXH has a lower level of $33.1 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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