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Healthcare ETFs in Focus on UnitedHealth's Q4 Earnings

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The largest U.S. health insurer UnitedHealth Group (UNH - Free Report) reported mixed fourth-quarter 2019 results wherein it breezed past the Zacks Consensus Estimate on earnings but lagged on revenues.

Earnings per share came in at $3.90, well above the Zacks Consensus Estimate of $3.77 and the year-ago earnings of $3.28. Revenues rose 4.3% year over year to $60.9 billion but fell shy of the estimated $60.98 billion. Results were boosted by growing pharmacy benefits.

The company affirmed its recently issued full-year adjusted earnings per share guidance of $16.25-$16.55. UnitedHealth expects strong sales of its government health plans this year. It expects to enroll 700,000 more people in its Medicare Advantage plans in 2020 (see: all the Healthcare ETFs here).

Following its earnings release, UNH shares climbed 2.8% at the close of day. The stock currently has a Zacks Rank #3 (Hold) and VGM Score of B. It belongs to a favorable Zacks industry (placed at the  top 26% of 250+ industries), which underscores its potential to outperform in the weeks ahead.

Given this, investors could tap the company’s growth with ETFs having the largest allocation to this health insurance giant. We have highlighted them in detail below:

iShares U.S. Healthcare Providers ETF IHF

This ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. In total, the fund holds 49 securities in its basket and UNH occupies the top position with 22.1% share. The fund has amassed $876.9 million in its asset base, while volume is moderate at about 59,000 shares per day, on average. It charges 43 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 10 Top-Performing ETFs of the Past Decade).

iShares Evolved U.S. Healthcare Staples ETF IEHS

This actively managed ETF employs data science techniques to identify companies with exposure to the health care staples sector. It holds 162 stocks in its basket with UnitedHealth taking the top spot at 11.2%. The fund has accumulated $11.3 million in its asset base and sees a meager volume of 2,000 shares. It charges 18 bps in annual fees.

Health Care Select Sector SPDR Fund XLV

The most popular health care ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $20.5 billion in its asset base and trades in heavy volume of around 8.3 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 61 securities in its basket, with UNH taking the second spot at 7.1% of the assets. Pharma accounts for 32.8% share from a sector look, while health care equipment and supplies, health care providers and services, and biotech have double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: A Look Back At S&P 500 Sector ETFs in 2019).

iShares U.S. Healthcare ETF IYH

This fund offers exposure to 120 securities by tracking the Dow Jones U.S. Health Care Index. Here again, UnitedHealth is the second firm accounting for 6.5% of the total assets. In terms of industrial exposure, pharma takes the top spot at 31.1%, followed by health care equipment (23.8%) and biotech (16.2%). The product has amassed $2.3 billion in its asset base, while charging 43 bps in annual fees. It trades in moderate volume of around 54,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook.

Vanguard Health Care ETF VHT

This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 403 stocks in its basket. Of these, UNH takes the second spot with 6.1% allocation. Pharma takes the largest share at 27.7%, while health care equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $10.1 billion and average daily volume of about 186,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Bet on Favorite Sector ETFs & Stocks This Earnings Season).

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