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JNJ Beats on Q2 Earnings, Ups View: ETFs to Buy

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Johnson & Johnson (JNJ - Free Report) set the ball rolling for the pharma and medical device manufacturer space’s second-quarter 2021 earnings on Jul 21, before the opening bell. The world's biggest healthcare products’ maker continued its long streak of earnings beat and outpaced revenue estimates. The company also lifted its full-year guidance.

Earnings per share came in at $2.48, beating the Zacks Consensus Estimate of $2.28 and improving 48.5% from the year-ago quarter. Revenues grew 27.1% year over year to $23.31 billion and edged past the Zacks Consensus Estimate of $22.31 billion. The stronger performance was driven by strong sales for cancer drug Darzalex as well as sales of Stelara, a treatment for Crohn's disease and plaque psoriasis.

The company recorded 164 million in COVID-19 vaccine sales in the second quarter, up 64% from the first, and aims to fetch $2.5 billion in sales by the end of the year. More than half of the sales is expected to be realized in the fourth quarter. The company expects to produce 500 million to 600 million doses of its one-shot vaccine this year (read: Delta Variant to Spark Rally in Stay-At-Home ETFs).

For 2021, Johnson & Johnson raised its revenue range from $90.6-$91.6 billion to $93.8-$94.6 billion, indicating year-over-year increase of 13.5-14.5%. Earnings per share guidance range has been revised to $9.60-$9.70 from $9.42-$9.57, representing year-over-year growth of 19.6-20.8%. The Zacks Consensus Estimate is pegged at $91.8 billion for revenues and $9.51 for earnings per share.

Following the results, JNJ shares rose 0.6% on the day. The stock currently has a Zacks Rank #3 (Hold) and VGM Score of B.

ETFs in Focus

Given this, investors should closely watch the movement of the stock and ETFs having the largest allocation to this diversified drug maker. We have highlighted them below (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 Pharmaceuticals Index. Of these, Johnson and Johnson takes the top spot, accounting for 22.7% share. The product has $369.3 million in AUM and charges 42 bps in fees and expenses. Volume is lower as it exchanges about 7,000 shares a day. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

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 $30.6 billion in its asset base and trades in a heavy volume of around 8.7 million shares. Expense ratio comes in at 0.12%. In total, the fund holds 64 securities in its basket, with JNJ taking the top spot, accounting for 9.1% of the assets. Pharma, and healthcare equipment and supplies accounts for 27.6% share each from a sector look, while healthcare providers and services, and biotech round off the next spots with a double-digit exposure each. The product has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: UnitedHealth's Solid Q2 Earnings Put These ETFs in Focus).

iShares Evolved U.S. Innovative Healthcare ETF (IEIH - Free Report)

This actively managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 250 stocks in its basket, JNJ is the top firm with a 9.5% allocation. The product has accumulated $38.6 million in its asset base and trades in a meager volume of 3,000 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 127 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 8.3% of the total assets. In terms of industrial exposure, pharma takes the top spot at 26%, followed by healthcare equipment (24.8%) and biotech (16.6%). The product has amassed nearly $2.7 billion in its asset base and charges 43 bps in annual fees. It trades in a good volume of around 32,000 shares a day and has a Zacks ETF Rank #1 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 505 stocks in its basket. Of these, Johnson & Johnson occupies the top position with a 7.3% allocation. Pharma takes the largest share at 23.8%, while healthcare equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $15.6 billion and an average daily volume of about 177,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.