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The Q4 earnings season has commenced and Johnson & Johnson (JNJ - Free Report) was the first drug company to report on Jan 23, before the opening bell. The world's biggest maker of health care products continued its long streak of earnings beat and offered a decent outlook for 2018.
Earnings per share came in at $1.74, a couple of cents ahead of the Zacks Consensus Estimate and 10.1% higher than the year-ago quarter. Revenues grew 11.5% year over year to $20.2 billion but fell shy of the Zacks Consensus Estimate of $20.22 billion. The company lagged the revenue estimate despite robust sales of blood-cancer treatments Darzalex and Imbruvica as well as plaque psoriasis treatment Tremfya.
Johnson & Johnson issued its 2018 outlook. It expects earnings per share to come in at $8.00-$8.20, well ahead of the Zacks Consensus Estimate of $7.86. Revenues are expected in the range of $80.60-$81.40 billion; the high-end is well below the Zacks Consensus Estimate of $81.55 billion (see: all the Healthcare ETFs here).
Market Impact
Despite the strong results, shares of JNJ dropped as much as 4.3% on the day, marking the biggest intraday decline since August 2015. The drop came as the U.S. Circuit Court of Appeals for the Federal Circuit upheld the ruling that the company’s patent on its top-selling arthritis drug Remicade is invalid. The blow came just a week after JNJ lost a patent on another blockbuster prostate cancer drug, Zytiga.
Currently, the stock has a Zacks Rank #3 (Hold) with a VGM Score of B. Further, Johnson & Johnson belongs to a solid industry with a Zacks Rank in the top 31%.
As a result, investors should closely watch the movement of the stock and keep a close eye on ETFs having double-digit allocation to this diversified drug maker. Below, we have highlighted those.
The most popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $17.9 billion in its asset base and trades in heavy volume of around 6.6 million shares. Expense ratio comes in at 0.14% annually. In total, the fund holds 61 securities in its basket with JNJ taking the top spot at 11.7% of the assets. Pharma accounts for 32.8% share from a sector look while healthcare providers and services, biotech, and healthcare equipment and supplies make up for a double-digit exposure each. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Healthcare ETFs to Watch As Q4 Earnings Unfold).
This fund offers exposure to 118 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 11.2% of total assets. In terms of industrial exposure, pharma takes the top spot at 32.4%, followed by biotech (23%), and healthcare equipment (18.9%). The product has amassed nearly $2.1 billion in its asset base while charges 44 bps in annual fees. It trades in a good volume of around 78,000 shares a day and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Edge MSCI Multifactor Healthcare ETF
This ETF follows the MSCI USA Health Care Diversified Multiple-Factor Capped Index and targets companies with the potential to outperform the broad U.S. healthcare sector. Holding 38 stocks in its basket, JNJ is the top firm with 11.1% allocation. From an industrial look, managed health care, pharmaceuticals, health care equipment and biotechnology takes the double-digit exposure each. The product has accumulated $11.9 million in its asset base and trades in a paltry volume of 7,000 shares per day on average. It charges 35 bps in annual fees and has a Zacks ETF Rank #3.
This ETF provides exposure to 43 pharma stocks by tracking the Dow Jones U.S. Select Pharmaceuticals Index. Here too, Johnson and Johnson takes the top spot, accounting for 10.2% share. The product has $580.9 million in AUM and charges 44 bps in fees and expenses. Volume is lower as it exchanges about 20,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: What Lies in Store for Pharma ETFs?).
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 372 stocks in its basket. Of these, Johnson & Johnson occupies the top position with 10.2% allocation. Pharma takes the largest share at 30.4% while biotech and healthcare equipment round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $7.6 billion and average daily volume of about 188,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
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Healthcare ETFs in Focus Post JNJ Q4 Results
The Q4 earnings season has commenced and Johnson & Johnson (JNJ - Free Report) was the first drug company to report on Jan 23, before the opening bell. The world's biggest maker of health care products continued its long streak of earnings beat and offered a decent outlook for 2018.
Earnings per share came in at $1.74, a couple of cents ahead of the Zacks Consensus Estimate and 10.1% higher than the year-ago quarter. Revenues grew 11.5% year over year to $20.2 billion but fell shy of the Zacks Consensus Estimate of $20.22 billion. The company lagged the revenue estimate despite robust sales of blood-cancer treatments Darzalex and Imbruvica as well as plaque psoriasis treatment Tremfya.
Johnson & Johnson issued its 2018 outlook. It expects earnings per share to come in at $8.00-$8.20, well ahead of the Zacks Consensus Estimate of $7.86. Revenues are expected in the range of $80.60-$81.40 billion; the high-end is well below the Zacks Consensus Estimate of $81.55 billion (see: all the Healthcare ETFs here).
Market Impact
Despite the strong results, shares of JNJ dropped as much as 4.3% on the day, marking the biggest intraday decline since August 2015. The drop came as the U.S. Circuit Court of Appeals for the Federal Circuit upheld the ruling that the company’s patent on its top-selling arthritis drug Remicade is invalid. The blow came just a week after JNJ lost a patent on another blockbuster prostate cancer drug, Zytiga.
Currently, the stock has a Zacks Rank #3 (Hold) with a VGM Score of B. Further, Johnson & Johnson belongs to a solid industry with a Zacks Rank in the top 31%.
As a result, investors should closely watch the movement of the stock and keep a close eye on ETFs having double-digit allocation to this diversified drug maker. Below, we have highlighted those.
Health Care Select Sector SPDR Fund (XLV - Free Report)
The most popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $17.9 billion in its asset base and trades in heavy volume of around 6.6 million shares. Expense ratio comes in at 0.14% annually. In total, the fund holds 61 securities in its basket with JNJ taking the top spot at 11.7% of the assets. Pharma accounts for 32.8% share from a sector look while healthcare providers and services, biotech, and healthcare equipment and supplies make up for a double-digit exposure each. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Healthcare ETFs to Watch As Q4 Earnings Unfold).
iShares U.S. Healthcare ETF (IYH - Free Report)
This fund offers exposure to 118 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 11.2% of total assets. In terms of industrial exposure, pharma takes the top spot at 32.4%, followed by biotech (23%), and healthcare equipment (18.9%). The product has amassed nearly $2.1 billion in its asset base while charges 44 bps in annual fees. It trades in a good volume of around 78,000 shares a day and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Edge MSCI Multifactor Healthcare ETF
This ETF follows the MSCI USA Health Care Diversified Multiple-Factor Capped Index and targets companies with the potential to outperform the broad U.S. healthcare sector. Holding 38 stocks in its basket, JNJ is the top firm with 11.1% allocation. From an industrial look, managed health care, pharmaceuticals, health care equipment and biotechnology takes the double-digit exposure each. The product has accumulated $11.9 million in its asset base and trades in a paltry volume of 7,000 shares per day on average. It charges 35 bps in annual fees and has a Zacks ETF Rank #3.
iShares U.S. Pharmaceuticals ETF (IHE - Free Report)
This ETF provides exposure to 43 pharma stocks by tracking the Dow Jones U.S. Select Pharmaceuticals Index. Here too, Johnson and Johnson takes the top spot, accounting for 10.2% share. The product has $580.9 million in AUM and charges 44 bps in fees and expenses. Volume is lower as it exchanges about 20,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: What Lies in Store for Pharma ETFs?).
Vanguard Health Care ETF (VHT - Free Report)
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 372 stocks in its basket. Of these, Johnson & Johnson occupies the top position with 10.2% allocation. Pharma takes the largest share at 30.4% while biotech and healthcare equipment round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $7.6 billion and average daily volume of about 188,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>