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JNJ Beats, Cuts View on Coronavirus: Healthcare ETFs in Focus
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Johnson & Johnson (JNJ - Free Report) set the ball rolling for pharma earnings when it reported first-quarter 2020 results on Apr 14, before the opening bell. The world's biggest healthcare products maker continued its long streak of earnings beat and outpaced revenue estimates. However, it lowered its full-year forecast due to coronavirus shutdowns.
Earnings per share came in at $2.30, beating the Zacks Consensus Estimate of $2.03 and were higher than the year-ago earnings of $2.10. Revenues grew 3.3% year over year to $20.7 billion and edged past the Zacks Consensus Estimate of $19.2 billion. The stronger performance was driven by higher demand for its cancer drugs and consumer products including Tylenol.
For 2020, Johnson & Johnson cut its sales forecast from $85.8-$86.6 billion to $79.2-$82.2 billion while earnings per share guidance was reduced to $7.50-$7.90 from $8.95-$9.10, citing the impact of the COVID-19 pandemic. The company said that the crisis, which has halted businesses and disrupted supply chains around the world, will hurt sales in its medical devices unit as hospitals delayed elective surgeries and procedures. On the other hand, its consumer division unit will likely see higher revenues driven by surging demand for consumer brands like Tylenol, Motrin, Listerine, Neutrogena and Avena (read: Coronavirus Testing, Vaccines & Treatments: What You Should Know).
Separately, the drug maker boosted its quarterly dividend by 6.3% to $1.01 per share, with the new dividend payable on Jun 9 to shareholders of record as of May 26.
The cut in guidance was more than offset by robust results and dividend hike. As such, shares of JNJ rose 4.5% at the close. Currently, the stock has a Zacks Rank #3 (Hold) and a Growth Score of B. Further, Johnson & Johnson belongs to a top-ranked Zacks industry Rank (top 11%), suggesting smooth trading in the days ahead.
ETFs in Focus
Given this, investors should closely watch the movement of the stock and keep a close eye on ETFs having double-digit allocation to this diversified drug maker. Below we have highlighted them (see:all the Healthcare ETFs here).
This ETF provides exposure to 44 companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select Pharmaceuticals Index. Of these, Johnson and Johnson takes the top spot, accounting for 20.4% share. The product has $319.7 million in AUM and charges 42 bps in fees and expenses. Volume is lower as it exchanges about 19,000 shares a day. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
The most-popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $21.8 billion in its asset base and trades in heavy volume of around 11.5 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 60 securities in its basket, with JNJ taking the top spot, accounting for 10.5% of the assets. Pharma accounts for 33.2% share from a sector look, while healthcare equipment and supplies, healthcare providers and services, and biotech have a double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Healthcare Stocks & ETFs to Gain on Coronavirus Test Progress).
iShares Evolved U.S. Innovative Healthcare ETF
This actively managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 229 stocks in its basket, JNJ is the top firm with 9.4% allocation. The product has accumulated $6.7 million in its asset base and trades in a meager volume of 4,000 shares per day on average. It charges 18 bps in annual fees.
This fund offers exposure to 119 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 9.7% of the total assets. In terms of industrial exposure, pharma takes the top spot at 31.4%, followed by healthcare equipment (23.3%) and biotech (17.6%). The product has amassed nearly $2.1 billion in its asset base and charges 43 bps in annual fees. It trades in a good volume of around 74,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Any Bright Spot in Q1 Earnings? Sector ETFs & Stocks to Buy).
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 389 stocks in its basket. Of these, Johnson & Johnson occupies the top position with 8.7% allocation. Pharma takes the largest share at 29.2%, while healthcare equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $9.3 billion and average daily volume of about 304,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
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JNJ Beats, Cuts View on Coronavirus: Healthcare ETFs in Focus
Johnson & Johnson (JNJ - Free Report) set the ball rolling for pharma earnings when it reported first-quarter 2020 results on Apr 14, before the opening bell. The world's biggest healthcare products maker continued its long streak of earnings beat and outpaced revenue estimates. However, it lowered its full-year forecast due to coronavirus shutdowns.
Earnings per share came in at $2.30, beating the Zacks Consensus Estimate of $2.03 and were higher than the year-ago earnings of $2.10. Revenues grew 3.3% year over year to $20.7 billion and edged past the Zacks Consensus Estimate of $19.2 billion. The stronger performance was driven by higher demand for its cancer drugs and consumer products including Tylenol.
For 2020, Johnson & Johnson cut its sales forecast from $85.8-$86.6 billion to $79.2-$82.2 billion while earnings per share guidance was reduced to $7.50-$7.90 from $8.95-$9.10, citing the impact of the COVID-19 pandemic. The company said that the crisis, which has halted businesses and disrupted supply chains around the world, will hurt sales in its medical devices unit as hospitals delayed elective surgeries and procedures. On the other hand, its consumer division unit will likely see higher revenues driven by surging demand for consumer brands like Tylenol, Motrin, Listerine, Neutrogena and Avena (read: Coronavirus Testing, Vaccines & Treatments: What You Should Know).
Separately, the drug maker boosted its quarterly dividend by 6.3% to $1.01 per share, with the new dividend payable on Jun 9 to shareholders of record as of May 26.
The cut in guidance was more than offset by robust results and dividend hike. As such, shares of JNJ rose 4.5% at the close. Currently, the stock has a Zacks Rank #3 (Hold) and a Growth Score of B. Further, Johnson & Johnson belongs to a top-ranked Zacks industry Rank (top 11%), suggesting smooth trading in the days ahead.
ETFs in Focus
Given this, investors should closely watch the movement of the stock and keep a close eye on ETFs having double-digit allocation to this diversified drug maker. Below we have highlighted them (see:all the Healthcare ETFs here).
iShares U.S. Pharmaceuticals ETF (IHE - Free Report)
This ETF provides exposure to 44 companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select Pharmaceuticals Index. Of these, Johnson and Johnson takes the top spot, accounting for 20.4% share. The product has $319.7 million in AUM and charges 42 bps in fees and expenses. Volume is lower as it exchanges about 19,000 shares a day. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Health Care Select Sector SPDR Fund (XLV - Free Report)
The most-popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $21.8 billion in its asset base and trades in heavy volume of around 11.5 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 60 securities in its basket, with JNJ taking the top spot, accounting for 10.5% of the assets. Pharma accounts for 33.2% share from a sector look, while healthcare equipment and supplies, healthcare providers and services, and biotech have a double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Healthcare Stocks & ETFs to Gain on Coronavirus Test Progress).
iShares Evolved U.S. Innovative Healthcare ETF
This actively managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 229 stocks in its basket, JNJ is the top firm with 9.4% allocation. The product has accumulated $6.7 million in its asset base and trades in a meager volume of 4,000 shares per day on average. It charges 18 bps in annual fees.
iShares U.S. Healthcare ETF (IYH - Free Report)
This fund offers exposure to 119 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 9.7% of the total assets. In terms of industrial exposure, pharma takes the top spot at 31.4%, followed by healthcare equipment (23.3%) and biotech (17.6%). The product has amassed nearly $2.1 billion in its asset base and charges 43 bps in annual fees. It trades in a good volume of around 74,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Any Bright Spot in Q1 Earnings? Sector ETFs & Stocks to Buy).
Vanguard Health Care ETF (VHT - Free Report)
This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 389 stocks in its basket. Of these, Johnson & Johnson occupies the top position with 8.7% allocation. Pharma takes the largest share at 29.2%, while healthcare equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $9.3 billion and average daily volume of about 304,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>