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Healthcare ETFs in Focus Ahead of Q2 Earnings

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The healthcare sector has gained some momentum lately on investors’ rush to safety in a volatile stock market. The sector is non-cyclical in nature, which in turn, is providing a cushion to the portfolio. Additionally, recession fears have raised the appeal for defensive bets.

As such, the ultra-popular ETFs, Health Care Select Sector SPDR Fund (XLV - Free Report) , Vanguard Health Care ETF (VHT - Free Report) , iShares U.S. Healthcare ETF (IYH - Free Report) and Fidelity MSCI Health Care Index ETF (FHLC - Free Report) are up around 9% each over the past month.

The further price movement of these funds depends on earnings releases from some big names like Pfizer (PFE - Free Report) , Merck (MRK - Free Report) , Amgen (AMGN - Free Report) , AbbVie (ABBV - Free Report) , Bristol Myers Squibb (BMY - Free Report) and Eli Liily (LLY - Free Report) that dominate returns. These firms are lined up to report their earnings in the next two weeks. All these stocks collectively account for 27.2% share in XLV, 26.7% in IYH, 24.3% in VHT and 23.2% in FHLC (see: all the Healthcare ETFs here).

Let’s dig deeper into the earnings picture of these companies, which will drive the performance of the above-mentioned funds in the coming days:

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Surprise Prediction for These Stocks

Pfizer has a Zacks Rank #2 and an Earnings ESP of -1.63%. The stock witnessed a positive earnings estimate revision of a penny for the to-be-reported quarter over the past seven days. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Pfizer delivered an earnings surprise of 14.76%, on average, in the past four quarters and has a VGM Score of A. Pfizer is scheduled to report earnings on Jul 28, before the opening bell.

Merck is expected to report results on Jul 28 before market open. It has a Zacks Rank #2 and an Earnings ESP of +7.18%. The stock witnessed a positive earnings estimate revision of nine cents over the past 30 days for the to-be-reported quarter. Additionally, Merck delivered an average beat of 13.42% in the last four quarters. Merck has a VGM Score of B.

Amgen carries a Zacks Rank #3 and has an Earnings ESP of -1.85%. It witnessed a positive earnings estimate revision of a penny over the past seven days for the quarter to be reported. The earnings surprise track over the past four quarters is strong, with the beat being 5.68%, on average. The stock has a VGM Score of A. Amgen will report earnings on Aug 4 (read: 5 ETFs Riding High on the Biotech Comeback5 ETFs Riding High on the Biotech Comeback).

AbbVie has a Zacks Rank #3 and an Earnings ESP of +1.45%. It saw a negative earnings estimate revision of nine cents over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 1.01%, on average, in the last four quarters. The stock has a VGM Score of A. The company is scheduled to report on Jul 29 before the opening bell.

Bristol-Myers will likely report earnings on Jul 27 before the opening bell. It has a Zacks Rank #3 and an Earnings ESP of -4.21%. The stock delivered an earnings surprise of 2.36%, on average, over the past four quarters, but saw negative earnings estimate revision of 2 cents for the to-be-reported quarter over the past seven days. It has a VGM Score of A.

Eli Lilly is expected to release earnings on Aug 4 before market open. It has a Zacks Rank #3 and an Earnings ESP of -4.19%. The stock saw a negative earnings estimate revision of three cents over the seven days for the to-be-reported quarter. Eli Lilly’s earnings surprise is 2.26%, on average, over the last four quarters. Eli Lilly has a VGM Score of A (read: Tap Q2 Earnings Growth With Sector ETFs).

Summing Up

The healthcare sector is expected to witness modest earnings growth of 1.5% in the second quarter. In particular, FHLC has a Zacks ETF Rank #2 while the remaining three have a Zacks ETF Rank #1.