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What Lies Ahead for Healthcare ETFs in Q2 Earnings?

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The healthcare sector has been performing well driven by potential vaccines and treatments for COVID-19. The ultra-popular ETFs, Health Care Select Sector SPDR Fund (XLV - Free Report) , 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) , have gained in the range of 3-5% in the past three months (read: ETFs to Play New Trends Triggered by COVID-19).

The price movement of the fund depends on earnings releases of some big names like Pfizer (PFE - Free Report) , Merck (MRK - Free Report) , Amgen (AMGN - Free Report) , AbbVie (ABBV - Free Report) , Gilead Sciences (GILD - Free Report) and Bristol-Myers Squibb (BMY - Free Report) that dominate returns. These firms are lined up to report their earnings in the coming weeks. All these stocks collectively account for 24% share in XLV, 22.1% in IYH, 20.1% in VHT and 20.2% in FHLC.

Let’s dig deeper into the earnings picture of these companies, which will drive the performance of the above-mentioned funds in the coming days:

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 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 +7.03%. The stock witnessed no earnings estimate revision for the to-be-reported quarter over the past 30 days. It delivered earnings surprise of 8.03%, on average, in the past four quarters and has a VGM Score of B. Pfizer is scheduled to report earnings on Jul 28, before the opening bell.

Merck is expected to report results on Jul 31 before market open. It has a Zacks Rank #3 and an Earnings ESP of -2.92%. The stock witnessed positive earnings estimate revision of 6 cents over the past 30 days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Additionally, the stock delivered average beat of 10.63% in the last four quarters. Merck has a VGM Score of B (see: all the Healthcare ETFs here).

Amgen carries a Zacks Rank #3 and has an Earnings ESP of -4.29%. It has witnessed positive earnings estimate revision of 4 cents over the past 30 days for the quarter to be reported. The earnings surprise track over the past four quarters is strong, with the beat being 8.42%, on average. The stock has a VGM Score of B. Amgen will report earnings on Jul 28.

AbbVie has a Zacks Rank #2 and an Earnings ESP of -1.34%. The company delivered earnings surprise of 2.77%, on average, in the last four quarters. It saw positive earnings estimate revision of a couple of cents over the past month for the to-be-reported quarter. The stock has a top VGM Score of A. The company is scheduled to report on Jul 31 before the opening bell.    

Gilead is expected to release earnings on Jul 30 after market close. It has a Zacks Rank #3 and an Earnings ESP of -9.75%. However, the stock saw negative earnings estimate revision of 6 cents over the past month for the to-be-reported quarter. Gilead’s negative earnings surprise was 3.07%, on average, over the last four quarters. Gilead has a VGM Score of B (read: Vaccine Hopes Boost These Sectors & ETFs).

Bristol-Myers will likely report earnings on Aug 6 before the opening bell. It has a Zacks Rank #2 and an Earnings ESP of +0.23%. The stock delivered an earnings surprise of 7.94%, on average, over the past four quarters, but saw negative earnings estimate revision of 3cents for the to-be-reported quarter in a month. It has a VGM Score of A.

Summing Up

The healthcare sector is expected to witness substantial earnings decline of 6.9% in the second quarter, representing the second strongest sector this earnings season. In particular, FHLC has a Zacks ETF Rank #3 while the remaining three have a Zacks ETF Rank #2.

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