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Pharma ETFs Gain on Q2 Earnings

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The Q2 earnings picture of the healthcare sector seems solid with results from the companies reported so far are up 17.7% on 20.3% revenue growth. Earnings and revenue beat ratios are 89.7% and 97.4%, respectively. Combining the actual results with the estimates for the still-to-report companies, total earnings for the sector are expected to grow 25.7% on revenue growth of 19.2% (see: all the Healthcare ETFs here).

Many industry bigwigs reported solid results with some beating on earnings or revenues or both. Many of them lifted the outlook for the full year. Let’s delve deeper into a few of them:

Earnings in Focus

Johnson and Johnson

The world's biggest healthcare products’ maker continued its long streak of earnings beat and outpaced revenue estimates. 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. For 2021, Johnson & Johnson raised its revenue range from $90.6-$91.6 billion to $93.8-$94.6 billion, indicating a year-over-year increase of 13.5-14.5%. The 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% (read: JNJ Beats on Q2 Earnings, Ups View: ETFs to Buy).

Pfizer

Pfizer also topped on both fronts. Earnings per share of $1.07 were well above the Zacks Consensus Estimate of 97 cents. Revenues of $18.98 billion edged past the consensus mark of $17.54 billion. On a year-over-year basis, earnings and revenues increased 73% and 92%, respectively. The U.S. drug giant raised its revenue guidance from $70.5-$72.5 billion to $78-$80 billion, indicating year-over-year growth of 89%, and earnings guidance from $3.55-$3.65 to $3.95-$4.05 per share, indicating year-over-year growth of 77%, for 2021.

Merck

Merck reported weaker-than-expected results. Earnings per share of $1.31 missed the Zacks Consensus Estimate of $1.33 but increased 28% from the year-ago quarter. Revenues rose 22% year over year at $11.4 billion and above the consensus mark of $11.21 billion. For 2021, Merck tightened its revenue guidance from $45.8-$47.8 billion to $46.4-$47.4 billion, which indicates year-over-year growth of 12-14%, while adjusted earnings are expected in the range of $5.47-$5.57 per share.

Bristol-Myers

Bristol-Myers reported solid results. It reported earnings per share of $1.93, 5 cents above the Zacks Consensus Estimate and higher than the year-ago earnings of $1.63. Revenues grew 16% year over year to $11. 7 billion and edged past the Zacks Consensus Estimate of $11.2 billion. The company reiterated its earnings per share guidance of $7.35-$7.55 for the full year.

Eli Lilly

Eli Lilly came up with weaker results. Earnings of $1.87 per share lagged the Zacks Consensus Estimate of $1.89 but increased 29% from the year-ago quarter. Revenues climbed 23% to $6.74 billion and surpassed the estimate of $6.57 billion. Eli Lilly narrowed its revenue guidance range from $26.6-$27.6 billion to $26.8-$27.4 billion for revenues while maintained its earnings per share forecast of $7.80-$8.00, indicating 15-18% year-over-year growth.

ETF Angle

The slew of Q2 results have led to smooth trading in pharma ETFs over the past 10 days. Below we have highlighted those in detail.

iShares U.S. Pharmaceuticals ETF (IHE - Free Report)

This ETF provides exposure to 47 U.S. companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select Pharmaceuticals Index. The in-focus five firms are the top 10 holdings in the basket, accounting for a combined 56.5% of the total assets, suggesting heavy concentration. The product has $392.5 million in AUM and charges 42 bps in fees and expense. Volume is light as it exchanges about 6,000 shares a day. The fund has gained 2.7% over the past 10 days and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Pharma & Healthcare ETFs at a One-Year High: Here's Why).

Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report)

This fund offers exposure to companies that are principally engaged in the research, development, manufacture, sale or distribution of pharmaceuticals and drugs of all types. It follows the Dynamic Pharmaceuticals Intellidex Index and holds 25 stocks in its basket with the in-focus five firms making up for a combined 24.8% share. The product has AUM of about $449.9 million and sees a lower volume of around 15,000 shares a day. The fund charges 56 bps in fees and expenses. The ETF has added 2% in the past 10 days and carries a Zacks ETF Rank #3 with a High risk outlook.

SPDR S&P Pharmaceuticals ETF (XPH - Free Report)

This fund provides exposure to pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With AUM of $249.6 million, it trades in a moderate volume of around 53,000 shares a day and charges 35 bps in fees a year. In total, the product holds 48 securities with the in-focus firms making up for nearly 5% share each. It has shed 0.7% in the same period and has a Zacks ETF Rank #3 with a High risk outlook.

VanEck Vectors Pharmaceutical ETF (PPH - Free Report)

This ETF follows the MVIS US Listed Pharmaceutical 25 Index and holds 25 stocks in its basket. The in-focus five firms account for around 5% share each. The product has amassed $339.6 million in its asset base and trades in a good volume of about 37,000 shares a day. Expense ratio is 0.35%. The fund has gained 2.2% over the past 10 days and carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Sanofi to Buy mRNA Developer: ETFs in Focus).

First Trust Nasdaq Pharmaceuticals ETF (FTXH - Free Report)

This fund tracks the Nasdaq US Smart Pharmaceuticals Index, holding 29 securities in its basket. The in-focus firms account for a combined 32.7% of the assets. FTXH has a lower level of $22.7 million in AUM and an average daily volume of 2,000 shares. It charges 60 bps in annual fees and has risen 2.1% in the past 10 days. The product has a Zacks ETF Rank #3.