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Wave of Solid Q3 Earnings Push Pharma ETFs Higher

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The Q3 earnings picture for the healthcare sector seems solid with results from the companies reported so far up 22.6% on 13.7% revenue growth. Earnings and revenue beat ratios are 90.7% and 79.1%, respectively. Combining the actual results with the estimates for the still-to-report companies, total earnings for the sector are expected to grow 28.7% on revenue growth of 14.5% (see: all the Healthcare ETFs here).

Many industry bigwigs reported solid results with some beating on earnings or revenues or both. Some of them also raised their 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, but lagged the revenue estimates. Earnings per share came in at $2.60, beating the Zacks Consensus Estimate of $2.37 and improving 18.2% from the year-ago quarter. Revenues grew 10.7% year over year to $23.3 billion but fell short of the Zacks Consensus Estimate of $23.6 billion. For 2021, Johnson & Johnson raised its revenue range from $93.8-$94.6 billion to $94.1-$94.6 billion, indicating a year-over-year increase of 13.9-14.5%. The earnings per share guidance range has been revised up from $9.60-$9.70 to $9.77-$9.82, representing year-over-year growth of 21.7-22.3% (read: JNJ Posts Mixed Q3 Bag, Ups View: ETFs in Focus).

Pfizer

Pfizer also topped on both fronts. Earnings per share of $1.34 were well above the Zacks Consensus Estimate of $1.08. Revenues of $24.1 billion edged past the consensus mark of $22.4 billion. On a year-over-year basis, earnings and revenues increased 129% and 134%, respectively. The U.S. drug giant raised its revenue guidance from $78-$80 billion to $81-$82 billion, indicating year-over-year growth of 94%, and earnings guidance from $3.95-$4.05 to $4.13-$4.18 per share, indicating year-over-year growth of 84%, for 2021.

Merck

Merck also reported better-than-expected results. Earnings per share of $1.75 outpaced the Zacks Consensus Estimate of $1.54 and increased 28% from the year-ago quarter. Revenues rose 20% year over year to $13.2 billion and came in above the consensus mark of $12.42 billion. For 2021, Merck lifted its 2021 outlook. The revenue guidance has been revised upward from $46.4-$47.4 billion to $47.4-$47.9 billion, which indicates year-over-year growth of 14-15%, while adjusted earnings are expected in the range of $5.65-$5.70, up from the previous guidance of $5.47-$5.57 per share.

Bristol-Myers

Bristol-Myers reported solid results. It reported earnings per share of $2, beating the Zacks Consensus Estimate of $1.91 and improving from the year-ago earnings of $1.63. Revenues grew 10% year over year to $11.6 billion and edged past the Zacks Consensus Estimate of $11.5 billion. The company raised its earnings per share guidance to $7.40-$7.55 from $7.35-$7.55 for the full year.

Eli Lilly

Eli Lilly came up with weaker results. Earnings of $1.94 per share lagged the Zacks Consensus Estimate of $1.98 but were higher than the year-ago earnings of $1.54. Revenues climbed 17.9% to $6.77 billion and surpassed the estimate of $6.66 billion. Eli Lilly Eli Lilly boosted its 2021 revenue and profit outlook. The revenue guidance has been revised up from $26.8-$27.4 billion to $27.2-$27.6 billion for revenues while earnings per share are expected to be $7.95-$8.05, suggesting a 15-cent increase from the lower end of its prior forecast.

ETF Angle

The slew of Q3 results has led to smooth trading in pharma ETFs over the past month. 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 55.2% of the total assets, suggesting heavy concentration. The product has $393.8 million in AUM and charges 42 bps in fees and expense. Volume is light as it exchanges about 5,000 shares a day. The fund has gained 5.4% over the past month and carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.

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 24 stocks in its basket with the in-focus five firms making up for nearly 6% share each. The product has AUM of about $446 million and sees a lower volume of around 21,000 shares a day. The fund charges 58 bps in fees and expenses. The ETF has added 4% in a month and carries a Zacks ETF Rank #3 with a High risk outlook (read: Will Pfizer ETFs Gain on Positive COVID-19 Booster Dose Data?).

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 $242.5 million, it trades in a moderate volume of around 47,000 shares a day and charges 35 bps in fees a year. In total, the product holds 47 securities with the in-focus firms making up for nearly 4% share each. It has risen 10.1% 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 $343.6 million in its asset base and trades in a good volume of about 38,000 shares a day. The expense ratio is 0.35%. The fund has gained 4.7% in a month and carries a Zacks ETF Rank #3 with a Medium risk outlook.

First Trust Nasdaq Pharmaceuticals ETF (FTXH - Free Report)

This fund tracks the Nasdaq US Smart Pharmaceuticals Index, holding 28 securities in its basket. The in-focus firms account for a combined 31.4% of the assets. FTXH has a lower level of $17.6 million in AUM and an average daily volume of 6,000 shares. It charges 60 bps in annual fees and has gained 5.4% in a month. The product has a Zacks ETF Rank #3 with a Medium risk outlook.