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While the broader stock market has been on the rise, healthcare is the only sector that has been in the red from a year-to-date look. The potential adverse impact of future policy changes, more specifically "Medicare for All" push, is weighing on the sector.
This plan will largely eliminate private insurance and shift all Americans into a Medicare-based, government-run healthcare plan that Republicans have criticized as too costly and radical. The plan, if approved, could significantly hurt profits in the managed care and health-services sectors.
UnitedHealth Group (UNH - Free Report) is already facing the heat of the proposed plan as its shares fell in spite of robust first-quarter 2019 results. The largest U.S. health insurer breezed past the Zacks Consensus Estimate on both earnings and revenues and raised its full-year forecast (read: UnitedHealth Falls Despite Q1 Beat, Healthcare ETFs in Focus).
However, broader healthcare ETFs such as Health Care Select Sector SPDR Fund (XLV - Free Report) has gained 2.5%so far this year while Vanguard Health Care ETF (VHT - Free Report) , iShares U.S. Healthcare ETF (IYH - Free Report) and Fidelity MSCI Health Care Index ETF (FHLC - Free Report) are up 4.3%, 3.4% and 4.2%, respectively. The strength is likely to continue with some big names like Pfizer (PFE - Free Report) , Merck (MRK - Free Report) , Amgen (AMGN - Free Report) , AbbVie (ABBV - Free Report) , and Gilead Sciences (GILD - Free Report) lined up to report in the coming weeks. All these stocks collectively account for 22.5% share in XLV, 20.8% in IYH, 19.1% in VHT and 19.5% in FHLC.
Let’s dig deeper into the earnings picture of these companies, which will drive the performance of the abovementioned funds in the coming days (see: all the Healthcare ETFs here):
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while Zacks Rank #4 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter
Inside Our Surprise Prediction for These Stocks
Pfizer has a Zacks Rank #3 and an Earnings ESP of -1.94%. The stock has seen positive earnings estimate revision of a penny for the to-be-reported quarter over the past 60 days. It delivered average four-quarter positive earnings surprise of 4.07%. It has a VGM Score of C. Pfizer is scheduled to report earnings on Apr 30, before the opening bell.
Merck is expected to report results on Apr 30 before market open. It has a Zacks Rank #2 and an Earnings ESP of -2.64%. The stock delivered a positive earnings surprise in each of the last four quarters, with the average beat being 3.13%. However, it has witnessed negative earnings estimate revision of four cents over the past 60 days for the to-be-reported quarter. Merck has a VGM Score of B (read: Healthcare's Near-Term Prospects Bright: 3 ETFs in Focus).
Merck & Co., Inc. Price, Consensus and EPS Surprise
Amgen carries a Zacks Rank #3 and has an Earnings ESP of -0.03%. The earnings surprise track over the past four quarters is strong, with the average positive surprise being 7.26%. Amgen has witnessed negative earnings estimate revision of three cents over the past 60 days for the quarter to be reported. The stock has a VGM Score of C. Amgen will report earnings on Apr 30 after market close.
AbbVie has a Zacks Rank #3 and an Earnings ESP of +0.89%, indicating a reasonable chance of an earnings surprise. The company delivered a positive earnings surprise in the last four quarters, with the average beat being 2.58%. It saw no earnings estimate revision over the past two months for the to-be-reported quarter. The stock has a solid VGM Score of B. The company is scheduled to report on Apr 25 before the opening bell.
Gilead is expected to release earnings on May 2 after market close. It has a Zacks Rank #3 and an Earnings ESP of +1.86%. Gilead delivered average positive earnings surprise of 1.99% over the last four quarters and saw negative earnings estimate revision of three cents over the past two months for the to-be-reported quarter. It has a VGM Score of D (read: Biotechnology Market on a Tear: 5 ETFs in Spotlight).
Gilead Sciences, Inc. Price, Consensus and EPS Surprise
With negative earnings revisions, the healthcare sector is expected to witness earnings growth of 1.8% in the first quarter, suggesting smooth trading for healthcare ETFs. All the four ETFs have a Zacks ETF Rank #1 (Strong Buy) or #2 (Buy) (read: Beat Q1 Earnings Woes With These Sector ETFs & Stocks).
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Can Q1 Earnings Lift Healthcare ETFs Higher?
While the broader stock market has been on the rise, healthcare is the only sector that has been in the red from a year-to-date look. The potential adverse impact of future policy changes, more specifically "Medicare for All" push, is weighing on the sector.
This plan will largely eliminate private insurance and shift all Americans into a Medicare-based, government-run healthcare plan that Republicans have criticized as too costly and radical. The plan, if approved, could significantly hurt profits in the managed care and health-services sectors.
UnitedHealth Group (UNH - Free Report) is already facing the heat of the proposed plan as its shares fell in spite of robust first-quarter 2019 results. The largest U.S. health insurer breezed past the Zacks Consensus Estimate on both earnings and revenues and raised its full-year forecast (read: UnitedHealth Falls Despite Q1 Beat, Healthcare ETFs in Focus).
However, broader healthcare ETFs such as Health Care Select Sector SPDR Fund (XLV - Free Report) has gained 2.5%so far this year while Vanguard Health Care ETF (VHT - Free Report) , iShares U.S. Healthcare ETF (IYH - Free Report) and Fidelity MSCI Health Care Index ETF (FHLC - Free Report) are up 4.3%, 3.4% and 4.2%, respectively. The strength is likely to continue with some big names like Pfizer (PFE - Free Report) , Merck (MRK - Free Report) , Amgen (AMGN - Free Report) , AbbVie (ABBV - Free Report) , and Gilead Sciences (GILD - Free Report) lined up to report in the coming weeks. All these stocks collectively account for 22.5% share in XLV, 20.8% in IYH, 19.1% in VHT and 19.5% in FHLC.
Let’s dig deeper into the earnings picture of these companies, which will drive the performance of the abovementioned funds in the coming days (see: all the Healthcare ETFs here):
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while Zacks Rank #4 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter
Inside Our Surprise Prediction for These Stocks
Pfizer has a Zacks Rank #3 and an Earnings ESP of -1.94%. The stock has seen positive earnings estimate revision of a penny for the to-be-reported quarter over the past 60 days. It delivered average four-quarter positive earnings surprise of 4.07%. It has a VGM Score of C. Pfizer is scheduled to report earnings on Apr 30, before the opening bell.
Pfizer Inc. Price, Consensus and EPS Surprise
Pfizer Inc. Price, Consensus and EPS Surprise | Pfizer Inc. Quote
Merck is expected to report results on Apr 30 before market open. It has a Zacks Rank #2 and an Earnings ESP of -2.64%. The stock delivered a positive earnings surprise in each of the last four quarters, with the average beat being 3.13%. However, it has witnessed negative earnings estimate revision of four cents over the past 60 days for the to-be-reported quarter. Merck has a VGM Score of B (read: Healthcare's Near-Term Prospects Bright: 3 ETFs in Focus).
Merck & Co., Inc. Price, Consensus and EPS Surprise
Merck & Co., Inc. Price, Consensus and EPS Surprise | Merck & Co., Inc. Quote
Amgen carries a Zacks Rank #3 and has an Earnings ESP of -0.03%. The earnings surprise track over the past four quarters is strong, with the average positive surprise being 7.26%. Amgen has witnessed negative earnings estimate revision of three cents over the past 60 days for the quarter to be reported. The stock has a VGM Score of C. Amgen will report earnings on Apr 30 after market close.
Amgen Inc. Price, Consensus and EPS Surprise
Amgen Inc. Price, Consensus and EPS Surprise | Amgen Inc. Quote
AbbVie has a Zacks Rank #3 and an Earnings ESP of +0.89%, indicating a reasonable chance of an earnings surprise. The company delivered a positive earnings surprise in the last four quarters, with the average beat being 2.58%. It saw no earnings estimate revision over the past two months for the to-be-reported quarter. The stock has a solid VGM Score of B. The company is scheduled to report on Apr 25 before the opening bell.
AbbVie Inc. Price, Consensus and EPS Surprise
AbbVie Inc. Price, Consensus and EPS Surprise | AbbVie Inc. Quote
Gilead is expected to release earnings on May 2 after market close. It has a Zacks Rank #3 and an Earnings ESP of +1.86%. Gilead delivered average positive earnings surprise of 1.99% over the last four quarters and saw negative earnings estimate revision of three cents over the past two months for the to-be-reported quarter. It has a VGM Score of D (read: Biotechnology Market on a Tear: 5 ETFs in Spotlight).
Gilead Sciences, Inc. Price, Consensus and EPS Surprise
Gilead Sciences, Inc. Price, Consensus and EPS Surprise | Gilead Sciences, Inc. Quote
Summing Up
With negative earnings revisions, the healthcare sector is expected to witness earnings growth of 1.8% in the first quarter, suggesting smooth trading for healthcare ETFs. All the four ETFs have a Zacks ETF Rank #1 (Strong Buy) or #2 (Buy) (read: Beat Q1 Earnings Woes With These Sector ETFs & Stocks).
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 >>