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Healthcare ETFs to Buy on UnitedHealth's Solid Q3 Earnings
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The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported stellar third-quarter 2019 results that led to huge optimism in the broader sector, which has been bearing the brunt of political worries and concerns over competition. The company breezed past the Zacks Consensus Estimate on earnings and revenues and raised its full-year forecast.
Earnings per share came in at $3.88, well above the Zacks Consensus Estimate of $3.75 and the year-ago earnings of $3.41. Revenues rose 7% year over year to $60.4 billion, topping the estimated $59.6 billion. Results were boosted by growing pharmacy benefits.
The company increased its adjusted earnings per share guidance for 2019 to $14.90-$15.00 from $14.70-$14.90. The new guidance is much higher than the current Zacks Consensus Estimate of $14.83. Additionally, the health insurer giant provided optimistic outlook for 2020 with expected profit growth of at least 13% and adjusted earnings growth in the low end of its long-term growth range of 13% to 16%, higher than analyst expectation of 11% (see: all the Healthcare ETFs here).
Based on strong results and outlook, UNH shares climbed 2.3% at the close of day – marking the biggest one-day gain in over a decade. The stock currently has a Zacks Rank #3 (Hold) and a VGM Score of A. It belongs to a top-ranked Zacks industry (top 36%), which underscores its potential to outperform in the weeks ahead.
Given this, investors could tap the company’s strong growth story with ETFs having the largest allocation to this health insurance giant. We have highlighted them in detail below:
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 49 securities in its basket and UNH occupies the top position with 22.3% share. The fund has amassed $767.1 million in its asset base, while volume is moderate at about 96,000 shares per day on average. It charges 43 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 ETFs to Ride on Highest Core U.S. Inflation Rate in a Year).
iShares Evolved U.S. Healthcare Staples ETF
This actively managed ETF employs data science techniques to identify companies with exposure to the health care staples sector. It holds 149 stocks in its basket with UnitedHealth taking the top spot at 10.3%. The fund has accumulated $7.1 million in its asset base and sees meager volume of 2,000 shares. It charges 18 bps in annual fees.
The most popular health care ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $17 billion in its asset base and trades in heavy volume of around 11 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 61 securities in its basket, with UNH taking the third spot at 6.2% of the assets. Pharma accounts for 31.9% share from a sector look, while health care equipment and supplies, health care providers and services, and biotech have double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Bet on Top-Notch Sector ETFs & Stocks to Sparkle Q4).
This fund offers exposure to 122 securities by tracking the Dow Jones U.S. Health Care Index. Here again, UnitedHealth is the third firm accounting for 5.7% of the total assets. In terms of industrial exposure, pharma takes the top spot at 30.2%, followed by health care equipment (24.7%) and biotech (17.9%). The product has amassed nearly $2 billion in its asset base, while charging 43 bps in annual fees. It trades in good volume of around 74,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook.
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 389 stocks in its basket. Of these, UNH takes the third spot with 5.2% allocation. Pharma takes the largest share at 28.5%, while health care equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $8.6 billion and average daily volume of about 203,000 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 Buy on UnitedHealth's Solid Q3 Earnings
The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported stellar third-quarter 2019 results that led to huge optimism in the broader sector, which has been bearing the brunt of political worries and concerns over competition. The company breezed past the Zacks Consensus Estimate on earnings and revenues and raised its full-year forecast.
Earnings per share came in at $3.88, well above the Zacks Consensus Estimate of $3.75 and the year-ago earnings of $3.41. Revenues rose 7% year over year to $60.4 billion, topping the estimated $59.6 billion. Results were boosted by growing pharmacy benefits.
The company increased its adjusted earnings per share guidance for 2019 to $14.90-$15.00 from $14.70-$14.90. The new guidance is much higher than the current Zacks Consensus Estimate of $14.83. Additionally, the health insurer giant provided optimistic outlook for 2020 with expected profit growth of at least 13% and adjusted earnings growth in the low end of its long-term growth range of 13% to 16%, higher than analyst expectation of 11% (see: all the Healthcare ETFs here).
Based on strong results and outlook, UNH shares climbed 2.3% at the close of day – marking the biggest one-day gain in over a decade. The stock currently has a Zacks Rank #3 (Hold) and a VGM Score of A. It belongs to a top-ranked Zacks industry (top 36%), which underscores its potential to outperform in the weeks ahead.
Given this, investors could tap the company’s strong growth story with ETFs having the largest allocation to this health insurance giant. We have highlighted them in detail below:
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 49 securities in its basket and UNH occupies the top position with 22.3% share. The fund has amassed $767.1 million in its asset base, while volume is moderate at about 96,000 shares per day on average. It charges 43 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 ETFs to Ride on Highest Core U.S. Inflation Rate in a Year).
iShares Evolved U.S. Healthcare Staples ETF
This actively managed ETF employs data science techniques to identify companies with exposure to the health care staples sector. It holds 149 stocks in its basket with UnitedHealth taking the top spot at 10.3%. The fund has accumulated $7.1 million in its asset base and sees meager volume of 2,000 shares. It charges 18 bps in annual fees.
Health Care Select Sector SPDR Fund (XLV - Free Report)
The most popular health care ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $17 billion in its asset base and trades in heavy volume of around 11 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 61 securities in its basket, with UNH taking the third spot at 6.2% of the assets. Pharma accounts for 31.9% share from a sector look, while health care equipment and supplies, health care providers and services, and biotech have double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Bet on Top-Notch Sector ETFs & Stocks to Sparkle Q4).
iShares U.S. Healthcare ETF (IYH - Free Report)
This fund offers exposure to 122 securities by tracking the Dow Jones U.S. Health Care Index. Here again, UnitedHealth is the third firm accounting for 5.7% of the total assets. In terms of industrial exposure, pharma takes the top spot at 30.2%, followed by health care equipment (24.7%) and biotech (17.9%). The product has amassed nearly $2 billion in its asset base, while charging 43 bps in annual fees. It trades in good volume of around 74,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Health Care ETF (VHT - Free Report)
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 389 stocks in its basket. Of these, UNH takes the third spot with 5.2% allocation. Pharma takes the largest share at 28.5%, while health care equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $8.6 billion and average daily volume of about 203,000 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 >>