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JNJ Beats Q3 Earnings, Lifts Outlook: Healthcare ETFs in Focus
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Johnson & Johnson (JNJ - Free Report) set the ball rolling for pharma and medical device manufacturer third-quarter 2020 earnings on Oct 13, before the opening bell. The world's biggest healthcare products maker continued its long streak of earnings beat and outpaced revenue estimates. Further, the company lifted its full-year outlook buoyed by strong demand for its cancer and Crohn's disease treatments.
Earnings per share came in at $2.20, beating the Zacks Consensus Estimate of $1.99 and improving 3.8% from the year-ago quarter. Revenues grew 2% year over year to $21.1 billion and edged past the Zacks Consensus Estimate of $20.53 billion. The stronger performance was driven by higher sales in the medical device unit, strong demand for some of its drugs including Darzalex, Imbruvica and Stelara, and strength in consumer health products like Tylenol and BandAids (read: Healthcare ETFs, Stocks That Gained Double Digits Last Week).
For 2020, Johnson & Johnson raised its sales forecast from $79.9-$81.4 billion to $82-$82.8 billion and earnings per share guidance to $7.95-$8.05 from $7.75-$7.95.
Market impact
Despite solid results and an upbeat view, shares of JNJ dropped 2.3% on the Oct 13 trading session. The decline came as the company halted its final-phase of clinical trials for its COVID-19 vaccine candidate due to an unexplained illness in one of the 60,000 participants. The pause has sparked concerns over the full economic rebound from the coronavirus-led downturn. Currently, the stock has a Zacks Rank #3 (Hold) and a Value Score of B. Johnson & Johnson belongs to the bottom 28% of the Zacks Industry Rank.
ETFs in Focus
Given this, investors should closely watch the movement of the stock and ETFs having a double-digit allocation to this diversified drug maker. Below we have highlighted them (see: all the Healthcare ETFs here).
This ETF provides exposure to 47 companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select 21.6% share. The product has $347.1 million in AUM and charges 42 bps in fees and expenses. Volume is lower as it exchanges about 6,000 shares a day. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Pharma ETFs to Benefit from Lilly's Coronavirus Antibody Progress).
The most-popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $23.3 billion in its asset base and trades in heavy volume of around 7.2 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 63 securities in its basket, with JNJ taking the top spot, accounting for 9.7% of the assets. Pharma accounts for 28.8% share from a sector look, while healthcare equipment and supplies, healthcare providers and services, and biotech have a double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
iShares Evolved U.S. Innovative Healthcare ETF
This actively managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 254 stocks in its basket, JNJ is the top firm with an 8.7% allocation. The product has accumulated $25.5 million in its asset base and trades in a meager volume of 9,000 shares per day on average. It charges 18 bps in annual fees.
This fund offers exposure to 122 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 8.8% of the total assets. In terms of industrial exposure, pharma takes the top spot at 27%, followed by healthcare equipment (25.4%) and biotech (17.8%). The product has amassed nearly $2.3 billion in its asset base and charges 43 bps in annual fees. It trades in a good volume of around 51,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 4 Top ETFs, Stocks From Attractive Sectors Pre Q3 Earnings).
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 431 stocks in its basket. Of these, Johnson & Johnson occupies the top position with an 8.3% allocation. Pharma takes the largest share at 26.3%, while healthcare equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $11.4 billion and average daily volume of about 192,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
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JNJ Beats Q3 Earnings, Lifts Outlook: Healthcare ETFs in Focus
Johnson & Johnson (JNJ - Free Report) set the ball rolling for pharma and medical device manufacturer third-quarter 2020 earnings on Oct 13, before the opening bell. The world's biggest healthcare products maker continued its long streak of earnings beat and outpaced revenue estimates. Further, the company lifted its full-year outlook buoyed by strong demand for its cancer and Crohn's disease treatments.
Earnings per share came in at $2.20, beating the Zacks Consensus Estimate of $1.99 and improving 3.8% from the year-ago quarter. Revenues grew 2% year over year to $21.1 billion and edged past the Zacks Consensus Estimate of $20.53 billion. The stronger performance was driven by higher sales in the medical device unit, strong demand for some of its drugs including Darzalex, Imbruvica and Stelara, and strength in consumer health products like Tylenol and BandAids (read: Healthcare ETFs, Stocks That Gained Double Digits Last Week).
For 2020, Johnson & Johnson raised its sales forecast from $79.9-$81.4 billion to $82-$82.8 billion and earnings per share guidance to $7.95-$8.05 from $7.75-$7.95.
Market impact
Despite solid results and an upbeat view, shares of JNJ dropped 2.3% on the Oct 13 trading session. The decline came as the company halted its final-phase of clinical trials for its COVID-19 vaccine candidate due to an unexplained illness in one of the 60,000 participants. The pause has sparked concerns over the full economic rebound from the coronavirus-led downturn. Currently, the stock has a Zacks Rank #3 (Hold) and a Value Score of B. Johnson & Johnson belongs to the bottom 28% of the Zacks Industry Rank.
ETFs in Focus
Given this, investors should closely watch the movement of the stock and ETFs having a double-digit allocation to this diversified drug maker. Below we have highlighted them (see: all the Healthcare ETFs here).
iShares U.S. Pharmaceuticals ETF (IHE - Free Report)
This ETF provides exposure to 47 companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select 21.6% share. The product has $347.1 million in AUM and charges 42 bps in fees and expenses. Volume is lower as it exchanges about 6,000 shares a day. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Pharma ETFs to Benefit from Lilly's Coronavirus Antibody Progress).
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 $23.3 billion in its asset base and trades in heavy volume of around 7.2 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 63 securities in its basket, with JNJ taking the top spot, accounting for 9.7% of the assets. Pharma accounts for 28.8% share from a sector look, while healthcare equipment and supplies, healthcare providers and services, and biotech have a double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
iShares Evolved U.S. Innovative Healthcare ETF
This actively managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 254 stocks in its basket, JNJ is the top firm with an 8.7% allocation. The product has accumulated $25.5 million in its asset base and trades in a meager volume of 9,000 shares per day on average. It charges 18 bps in annual fees.
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, Johnson & Johnson dominates the fund’s returns with 8.8% of the total assets. In terms of industrial exposure, pharma takes the top spot at 27%, followed by healthcare equipment (25.4%) and biotech (17.8%). The product has amassed nearly $2.3 billion in its asset base and charges 43 bps in annual fees. It trades in a good volume of around 51,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 4 Top ETFs, Stocks From Attractive Sectors Pre Q3 Earnings).
Vanguard Health Care ETF (VHT - Free Report)
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 431 stocks in its basket. Of these, Johnson & Johnson occupies the top position with an 8.3% allocation. Pharma takes the largest share at 26.3%, while healthcare equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $11.4 billion and average daily volume of about 192,000 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 >>