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Healthcare ETFs Looks Strong Ahead of Q1 Earnings

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The healthcare sector has been on a tear driven by potential vaccines and treatments for COVID-19, which has now infected more than 2.4 million people globally and claimed 166,000 lives (read: Coronavirus Makes Biotech ETFs Red Hot).

The ultra-popular ETF, 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) were up at nearly 21% each over a month. The price movement of the fund depends on earnings releases of some big names like Pfizer PFE, Merck MRK, Amgen AMGN, AbbVie (ABBV - Free Report) , Gilead Sciences GILD and Bristol-Myers Squibb BMY that dominate returns.

These firms are lined up to report their earnings in the coming weeks. All these stocks collectively account for 22.1% share in XLV, 20.2% in IYH, 19.1% in VHT and 18.8% in FHLC. 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 0.00%. The stock saw positive earnings estimate revision of a penny for the to-be-reported quarter over the past 30 days. It delivered positive earnings surprise of 7.46%, on average, in the past four quarters and has a VGM Score of C. Pfizer is scheduled to report earnings on Apr 28, before the opening bell.

Merck is expected to report results on Apr 28 before market open. It has a Zacks Rank #2 and an Earnings ESP of 0.00%. The stock delivered a positive earnings surprise in the last four quarters, with the average beat being 12.70%. It witnessed negative earnings estimate revision of a penny over the past 30 days for the to-be-reported quarter. Merck has a VGM Score of B (see: all the Healthcare ETFs here).

Amgen carries a Zacks Rank #3 and has an Earnings ESP of -2.96%. The earnings surprise track over the past four quarters is strong, with the positive surprise being 6.04%, on average. Amgen has witnessed negative earnings estimate revision of 3 cents over the past 30 days for the quarter to be reported. The stock has a VGM Score of D. Amgen will report earnings on May 5.

AbbVie has a Zacks Rank #3 and an Earnings ESP of -0.30%. The company delivered a positive earnings surprise in the last four quarters, with the average beat being 2.09%. It saw positive earnings estimate revision of couple of cents over the past month for the to-be-reported quarter. The stock has a top VGM Score of A. The company is scheduled to report on May 1 before the opening bell.    

Gilead is expected to release earnings on Apr 30 after market close. It has a Zacks Rank #3 and an Earnings ESP of +12.23%. However, the stock saw negative earnings estimate revision of a penny over the past month for the to-be-reported quarter. Gilead’s negative earnings surprise was 2.49%, on average, over the last four quarters. Gilead has a VGM Score of C (read: ETFs to Rise as Gilead Drug Shows Promise in Coronavirus Cure).

Bristol-Myers will likely report earnings on Mar 7 before the opening bell. It has a Zacks Rank #2 and an Earnings ESP of 0.00%. The stock delivered an average positive earnings surprise of 4.12% over the past four quarters, but saw negative earnings estimate revision of 10 cents for the to-be-reported quarter in a month. It has a VGM Score of B.

Summing Up

The healthcare sector is expected to witness substantial earnings growth of 1.9% in the first quarter, suggesting some room for upside for healthcare ETFs. In particular, FHLC has a Zacks ETF Rank #3 while the remaining three have a Zacks ETF Rank #2.

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