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Healthcare ETFs to Ride on UnitedHealth's Solid Q2 & Outlook
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The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported robust second-quarter 2018 results. The company breezed past the Zacks Consensus Estimate on earnings but revenues came on par. The company raised its full-year earnings outlook encouraged by strong growth in its health-care plan membership and premiums.
Earnings per share came in at $3.14, well above the Zacks Consensus Estimate of $3.03 and 28% higher than the year-ago quarter. Revenues rose 12% year over year to $56.1 billion, in-line with the Zacks Consensus Estimate. Tens of thousands of retirees joined the company’s health insurance plans during the quarter (read: Want to Tap Merger Mania? Play Top-Ranked Health Care ETFs).
For 2018, the company raised its adjusted earnings per share guidance to $12.50-$12.75 from $12.40-$12.65. The midpoint of new guidance is slightly above the Zacks Consensus Estimate of $12.62. This suggests a solid outlook for the company’s growth.
The stock currently has a Zacks Rank #2 (Buy) and belongs to a top-ranked Zacks industry (top 28%). Further, it flaunts a top Value and Growth Score of A each, underscoring its potential to outperform in the weeks ahead.
Given the strong fundamentals, investors should tap the opportunity, with ETFs having the largest allocation to this health insurer giant. For them, we have presented five ETFs with upside potential for the days ahead.
iShares Evolved U.S. Healthcare Staples ETF
This actively managed ETF employs data science techniques to identify companies with exposure to the healthcare staples sector. It holds 161 stocks in its basket with UnitedHealth taking the top spot at 15.4%. The fund has accumulated $5.4 million since its debut in late March and sees meager volume of under 500 shares. It charges 18 bps in annual fees.
iShares U.S. Healthcare Providers ETF (IHF - Free Report)
This ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. In total, the fund holds 46 securities in its basket and UNH occupies the top position with 12.7% share. The fund has amassed $603.3 million in its asset base, while volume is moderate at about 44,000 shares per day on average. It charges 44 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 4 Sector ETFs Braved Trade Turmoil in Q2).
The most popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $16.5 billion in its asset base and trades in heavy volume of around 9.2 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 63 securities in its basket with UNH taking the second spot at 7.3% of the assets. Pharma accounts for 30.7% share from a sector look while healthcare providers and services, healthcare equipment and supplies, and biotech make up for a double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
This fund offers exposure to 120 securities by tracking the Dow Jones U.S. Health Care Index. Here again, UnitedHealth is the second firm accounting for 6.8% of total assets. In terms of industrial exposure, pharma takes the top spot at 29.6%, followed by biotech (20.6%), and healthcare equipment (20.2%). The product has amassed nearly $2 billion in its asset base while charges 44 bps in annual fees. It trades in a moderate volume of around 80,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook (see: all the healthcare ETFs here).
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 378 stocks in its basket. Of these, UNH takes the second spot with 6.2% allocation. Pharma takes the largest share at 27.9%, 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 182,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
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Healthcare ETFs to Ride on UnitedHealth's Solid Q2 & Outlook
The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported robust second-quarter 2018 results. The company breezed past the Zacks Consensus Estimate on earnings but revenues came on par. The company raised its full-year earnings outlook encouraged by strong growth in its health-care plan membership and premiums.
Earnings per share came in at $3.14, well above the Zacks Consensus Estimate of $3.03 and 28% higher than the year-ago quarter. Revenues rose 12% year over year to $56.1 billion, in-line with the Zacks Consensus Estimate. Tens of thousands of retirees joined the company’s health insurance plans during the quarter (read: Want to Tap Merger Mania? Play Top-Ranked Health Care ETFs).
For 2018, the company raised its adjusted earnings per share guidance to $12.50-$12.75 from $12.40-$12.65. The midpoint of new guidance is slightly above the Zacks Consensus Estimate of $12.62. This suggests a solid outlook for the company’s growth.
The stock currently has a Zacks Rank #2 (Buy) and belongs to a top-ranked Zacks industry (top 28%). Further, it flaunts a top Value and Growth Score of A each, underscoring its potential to outperform in the weeks ahead.
Given the strong fundamentals, investors should tap the opportunity, with ETFs having the largest allocation to this health insurer giant. For them, we have presented five ETFs with upside potential for the days ahead.
iShares Evolved U.S. Healthcare Staples ETF
This actively managed ETF employs data science techniques to identify companies with exposure to the healthcare staples sector. It holds 161 stocks in its basket with UnitedHealth taking the top spot at 15.4%. The fund has accumulated $5.4 million since its debut in late March and sees meager volume of under 500 shares. It charges 18 bps in annual fees.
iShares U.S. Healthcare Providers ETF (IHF - Free Report)
This ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. In total, the fund holds 46 securities in its basket and UNH occupies the top position with 12.7% share. The fund has amassed $603.3 million in its asset base, while volume is moderate at about 44,000 shares per day on average. It charges 44 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 4 Sector ETFs Braved Trade Turmoil in Q2).
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 $16.5 billion in its asset base and trades in heavy volume of around 9.2 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 63 securities in its basket with UNH taking the second spot at 7.3% of the assets. Pharma accounts for 30.7% share from a sector look while healthcare providers and services, healthcare equipment and supplies, and biotech make up for a double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
iShares U.S. Healthcare ETF (IYH - Free Report)
This fund offers exposure to 120 securities by tracking the Dow Jones U.S. Health Care Index. Here again, UnitedHealth is the second firm accounting for 6.8% of total assets. In terms of industrial exposure, pharma takes the top spot at 29.6%, followed by biotech (20.6%), and healthcare equipment (20.2%). The product has amassed nearly $2 billion in its asset base while charges 44 bps in annual fees. It trades in a moderate volume of around 80,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook (see: all the healthcare ETFs here).
Vanguard Health Care ETF (VHT - Free Report)
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 378 stocks in its basket. Of these, UNH takes the second spot with 6.2% allocation. Pharma takes the largest share at 27.9%, 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 182,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 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 >>