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Solid Q4 Earnings Fail to Impress Pharma ETFs

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The Q4 earnings picture for the healthcare sector seems solid with results from the companies that have reported so far up 18.5% on 12.7% revenue growth. Both earnings and revenue beat ratios are 71.7%. Combining the actual results with the estimates for the still-to-report companies, total earnings for the sector are expected to grow 25.8% on revenue growth of 13.9% (see: all the Healthcare ETFs here).

Many industry bigwigs reported solid results with some beating on earnings or revenues or both. However, solid earnings failed to impress pharma ETFs over the past month due to a broad sell-off in the market. iShares U.S. Pharmaceuticals ETF (IHE - Free Report) , Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report) , VanEck Vectors Pharmaceutical ETF (PPH - Free Report) , SPDR S&P Pharmaceuticals ETF (XPH - Free Report) and First Trust Nasdaq Pharmaceuticals ETF (FTXH - Free Report) are down in the range of 0.9% to 3.7%.

Let’s delve deeper into earnings of some of the bigwigs:

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 $2.13, beating the Zacks Consensus Estimate by a penny and improving 14.5% from the year-ago quarter. Revenues grew 10.4% year over year to $24.8 billion but fell short of the Zacks Consensus Estimate of $25.2 billion. For 2022, Johnson & Johnson expects revenues in the range of $98.9-$100.4 billion, indicating a year-over-year increase of 5.5-7%. The earnings per share guidance is expected to be $10.40-$10.60, representing year-over-year growth of 6.1-8.2%.

Pfizer

Pfizer also topped on earnings and missed on revenues. Earnings per share of $1.08 were well above the Zacks Consensus Estimate of 85 cents. Revenues of $23.84 billion fell short of the consensus mark of $23.93 billion. On a year-over-year basis, earnings and revenues increased 152% and 105%, respectively. The U.S. drug giant issued its 2022 revenue guidance of $98-$102 billion and earnings guidance of $6.35-$6.55 per share (read: Top and Flop ETFs At Midway Q1).

Merck

Merck reported better-than-expected results. Earnings per share of $1.80 outpaced the Zacks Consensus Estimate of $1.46 and increased 84% from the year-ago quarter. Revenues rose 24% year over year to $13.5 billion and came in above the consensus mark of $12.6 billion. For 2022, Merck issued a revenue and earnings guidance. It expects revenues in the range of $56.1-$57.6 billion, which indicates year-over-year growth of 15-18%, while adjusted earnings are expected in the range of $7.12-$7.27.

Bristol-Myers

Bristol-Myers reported earnings per share of $1.83, on par with the Zacks Consensus Estimate and improving from the year-ago earnings of $1.46. Revenues grew 8% year over year to $11.98 billion and slightly edged past the Zacks Consensus Estimate of $11.96 billion. The company expects its earnings per share of $7.65-$7.95 for 2022.

Eli Lilly

Eli Lilly came up with mixed results. Earnings of $2.49 per share lagged the Zacks Consensus Estimate of $2.51 but were 8% higher than the year-ago earnings. Revenues climbed 8% to $8 billion and surpassed the estimate of 7.56 billion. Eli Lilly reiterated the 2022 guidance it provided in December. It expects revenues between $27.8 billion and $28.3 billion while earnings per share are expected between $8.50 and $8.65.

ETF Angle

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

iShares U.S. Pharmaceuticals ETF provides exposure to 45 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 57.8% of the total assets, suggesting heavy concentration.

iShares U.S. Pharmaceuticals ETF has $382.9 million in AUM and charges 42 bps in fees and expense. Volume is light as it exchanges about 9,000 shares a day. The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report)

Invesco Dynamic Pharmaceuticals ETF 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 26 stocks in its basket with the in-focus firms making up for nearly 5% share each.

Invesco Dynamic Pharmaceuticals ETF has AUM of about $330.5 million and sees a lower volume of around 14,000 shares a day. The fund charges 58 bps in fees and expenses. The ETF has a Zacks ETF Rank #3 with a High risk outlook (read: Buffett's Interest in Activision: ETF Lessons to Follow).

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

SPDR S&P Pharmaceuticals ETF provides exposure to pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With AUM of $202.8 million, it trades in a moderate volume of around 74,000 shares a day and charges 35 bps in fees a year.

SPDR S&P Pharmaceuticals ETF holds 48 securities with the in-focus firms making up for nearly 5% share each. It has a Zacks ETF Rank #3 with a High risk outlook.

VanEck Vectors Pharmaceutical ETF (PPH - Free Report)

VanEck Vectors Pharmaceutical 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 $300.6 million in its asset base and trades in a good volume of about 73,000 shares a day. The expense ratio is 0.35%.

VanEck Vectors Pharmaceutical ETF carries a Zacks ETF Rank #3 with a Medium risk outlook.

First Trust Nasdaq Pharmaceuticals ETF (FTXH - Free Report)

First Trust Nasdaq Pharmaceuticals ETF tracks the Nasdaq US Smart Pharmaceuticals Index, holding 28 securities in its basket. The in-focus five firms account for a combined 28.8% of the assets. FTXH has a lower level of $16.6 million in AUM and an average daily volume of 3,000 shares.

First Trust Nasdaq Pharmaceuticals ETF charges 60 bps in annual fees and has a Zacks ETF Rank #3.