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Biotech ETFs in Focus on Impressive Q2 Earnings Results
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Startling investors around the globe, President Trump announced a 10% of tariff on the remaining $300 billion on almost all exports from China to the United States. This move has ‘trumped’ hopes of many investors waiting for a truce between the two largest economies. Amid this political conundrum, the biotech industry has kept its promise of solid returns so far with rally in some major biotechnology indexes reflecting the same. In this context, the NASDAQ Biotechnology Index has returned 8.5% year to date.
Let’s take a look at some big biotechnological earnings releases and see if these will impact ETFs exposed to the space.
Earnings in Focus
On Jul 30, Amgen (AMGN - Free Report) reported second-quarter 2019 earnings of $3.97 per share, which surpassed the Zacks Consensus Estimate of $3.58. Earnings rose 4% year over year helped by a lower share count. Total revenues of $5.87 billion in the quarter also outpaced the Zacks Consensus Estimate of $5.68 billion. However, total revenues declined 3% year over year.
The company raised the low end of its 2019 sales and earnings guidance for the second time this year buoyed by a strong second-quarter performance. The company expects revenues in the range of $22.4-$22.9 billion versus $22.0-$22.9 billion expected earlier. Adjusted earnings per share are anticipated in the band of $13.75-$14.30 versus $13.25-$14.30 projected previously. Shares rose about 6.1% since the earnings release (as of Aug 2, 2019).
On Jul 30, Gilead Sciences (GILD - Free Report) reported better-than-expected results for the second quarter of 2019 on strong Biktarvy sales. It also raised its sales guidance for 2019. The company reported earnings of $1.82 per share in the second quarter, falling from $1.91 a year ago but surpassing the Zacks Consensus Estimate of $1.74. Total revenues of $5.68 billion outpaced the Zacks Consensus Estimate of $5.56 billion but were almost flat year over year (see all Health Care ETFs here).
Based on favorable a demand trend in the first half of 2019, Gilead raised its guidance for net product sales. The company now expects sales of $21.6-$22.1 billion compared with the previous guidance of $21.3-$21.8 billion. However, the stock has slipped 3.2% since reporting earnings (as of Aug 2).
On Jul 23, Biogen (BIIB - Free Report) reported second-quarter 2019 earnings per share of $9.15 which surpassed the Zacks Consensus Estimate of $7.58. Earnings increased 58% year over year on higher revenues and lower R&D costs. Also, a lower share count due to share buybacks in the quarter benefited earnings. Sales came in $3.62 billion, up 8% from the year-ago quarter. Sales also surpassed the Zacks Consensus Estimate of $3.48 billion. Sales growth was primarily led by impressive performance by the key multiple sclerosis drug, Tecfidera, globally and spinal muscular atrophy drug, Spinraza, in the United States. The stock has gained 4.2% since the earnings report (as of Aug 2).
On Jul 24, Alexion Pharmaceuticals posted second-quarter 2019 adjusted earnings per share of $2.64, which rose 27.5% from the year-ago quarter’s $2.07. Earnings also outpaced the Zacks Consensus Estimate of $2.36. Solid product revenues drove the bottom line in the quarter. Revenues were up 15.2% year over year to $1.20 billion and surpassed the Zacks Consensus Estimate of $1.17 billion. Revenues were led by higher sales of Soliris, Strensiq and Kanuma. However, foreign currency dented revenue growth by 1%.
The company raised its revenue and earnings guidance for 2019. The company expects earnings per share of $9.65-$9.85, up from the previous guidance of $9.25-$9.45. Alexion projects revenues of $4.75-$4.80 billion, up from the prior outlook of $4.68-$4.75 billion. However, the stock has lost 8.2% since the earnings release (as of Aug 2, 2019).
Biotech ETFs in Focus
In the current scenario, we believe it is prudent to discuss a few ETFs which have a relatively wide exposure to the companies discussed.
This fund seeks to provide exposure to U.S. biotechnology stocks and tracks the NASDAQ Biotechnology Index. It comprises 219 holdings with the above-mentioned companies taking about 24.2% of the fund. It has AUM of $7.04 billion and charges a fee of 47 basis points a year. The fund carries a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Global X Launches GNOM ETF to Tap Booming Genomics Space).
The underlying MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. It holds about 25 securities in its basket, with the concerned companies having 26.5% weight in the fund. Its AUM is $358.9 million and expense ratio is 0.35%. The fund carries a Zacks ETF Rank #2 with a High risk outlook (read: AbbVie to Buy Allergan: Prescribed ETFs).
The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 118 securities in its basket and puts about 5.7% weight in the in-focus companies. Its AUM is $4.04 billion and expense ratio is 0.35%. The fund carries a Zacks ETF Rank #2 with a High risk outlook (read: Pfizer-Array Biopharma Deal Bump Up Biotech ETFs).
First Trust Amex Biotechnology Index (FBT - Free Report)
The fund measures the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. It holds about 31 securities in its basket with the concerned companies having 13.6% weight in the fund. Its AUM is around $2.81 billion and expense ratio is 0.57%. The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: ETF & Stock Winners of Longest US Economic Expansion).
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Biotech ETFs in Focus on Impressive Q2 Earnings Results
Startling investors around the globe, President Trump announced a 10% of tariff on the remaining $300 billion on almost all exports from China to the United States. This move has ‘trumped’ hopes of many investors waiting for a truce between the two largest economies. Amid this political conundrum, the biotech industry has kept its promise of solid returns so far with rally in some major biotechnology indexes reflecting the same. In this context, the NASDAQ Biotechnology Index has returned 8.5% year to date.
Increasing M&A deals, growing AI dominance and favorable regulatory tidings continue to boost the biotech market (read: Why These Innovative Biotech ETFs Are Soaring).
Let’s take a look at some big biotechnological earnings releases and see if these will impact ETFs exposed to the space.
Earnings in Focus
On Jul 30, Amgen (AMGN - Free Report) reported second-quarter 2019 earnings of $3.97 per share, which surpassed the Zacks Consensus Estimate of $3.58. Earnings rose 4% year over year helped by a lower share count. Total revenues of $5.87 billion in the quarter also outpaced the Zacks Consensus Estimate of $5.68 billion. However, total revenues declined 3% year over year.
The company raised the low end of its 2019 sales and earnings guidance for the second time this year buoyed by a strong second-quarter performance. The company expects revenues in the range of $22.4-$22.9 billion versus $22.0-$22.9 billion expected earlier. Adjusted earnings per share are anticipated in the band of $13.75-$14.30 versus $13.25-$14.30 projected previously. Shares rose about 6.1% since the earnings release (as of Aug 2, 2019).
On Jul 30, Gilead Sciences (GILD - Free Report) reported better-than-expected results for the second quarter of 2019 on strong Biktarvy sales. It also raised its sales guidance for 2019. The company reported earnings of $1.82 per share in the second quarter, falling from $1.91 a year ago but surpassing the Zacks Consensus Estimate of $1.74. Total revenues of $5.68 billion outpaced the Zacks Consensus Estimate of $5.56 billion but were almost flat year over year (see all Health Care ETFs here).
Based on favorable a demand trend in the first half of 2019, Gilead raised its guidance for net product sales. The company now expects sales of $21.6-$22.1 billion compared with the previous guidance of $21.3-$21.8 billion. However, the stock has slipped 3.2% since reporting earnings (as of Aug 2).
On Jul 23, Biogen (BIIB - Free Report) reported second-quarter 2019 earnings per share of $9.15 which surpassed the Zacks Consensus Estimate of $7.58. Earnings increased 58% year over year on higher revenues and lower R&D costs. Also, a lower share count due to share buybacks in the quarter benefited earnings. Sales came in $3.62 billion, up 8% from the year-ago quarter. Sales also surpassed the Zacks Consensus Estimate of $3.48 billion. Sales growth was primarily led by impressive performance by the key multiple sclerosis drug, Tecfidera, globally and spinal muscular atrophy drug, Spinraza, in the United States. The stock has gained 4.2% since the earnings report (as of Aug 2).
On Jul 24, Alexion Pharmaceuticals posted second-quarter 2019 adjusted earnings per share of $2.64, which rose 27.5% from the year-ago quarter’s $2.07. Earnings also outpaced the Zacks Consensus Estimate of $2.36. Solid product revenues drove the bottom line in the quarter. Revenues were up 15.2% year over year to $1.20 billion and surpassed the Zacks Consensus Estimate of $1.17 billion. Revenues were led by higher sales of Soliris, Strensiq and Kanuma. However, foreign currency dented revenue growth by 1%.
The company raised its revenue and earnings guidance for 2019. The company expects earnings per share of $9.65-$9.85, up from the previous guidance of $9.25-$9.45. Alexion projects revenues of $4.75-$4.80 billion, up from the prior outlook of $4.68-$4.75 billion. However, the stock has lost 8.2% since the earnings release (as of Aug 2, 2019).
Biotech ETFs in Focus
In the current scenario, we believe it is prudent to discuss a few ETFs which have a relatively wide exposure to the companies discussed.
iSharesNasdaq Biotechnology ETF (IBB - Free Report)
This fund seeks to provide exposure to U.S. biotechnology stocks and tracks the NASDAQ Biotechnology Index. It comprises 219 holdings with the above-mentioned companies taking about 24.2% of the fund. It has AUM of $7.04 billion and charges a fee of 47 basis points a year. The fund carries a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Global X Launches GNOM ETF to Tap Booming Genomics Space).
VanEck Vectors Biotech ETF (BBH - Free Report)
The underlying MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. It holds about 25 securities in its basket, with the concerned companies having 26.5% weight in the fund. Its AUM is $358.9 million and expense ratio is 0.35%. The fund carries a Zacks ETF Rank #2 with a High risk outlook (read: AbbVie to Buy Allergan: Prescribed ETFs).
SPDR S&P Biotech ETF (XBI - Free Report)
The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 118 securities in its basket and puts about 5.7% weight in the in-focus companies. Its AUM is $4.04 billion and expense ratio is 0.35%. The fund carries a Zacks ETF Rank #2 with a High risk outlook (read: Pfizer-Array Biopharma Deal Bump Up Biotech ETFs).
First Trust Amex Biotechnology Index (FBT - Free Report)
The fund measures the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. It holds about 31 securities in its basket with the concerned companies having 13.6% weight in the fund. Its AUM is around $2.81 billion and expense ratio is 0.57%. The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: ETF & Stock Winners of Longest US Economic Expansion).
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>