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, lockdown measures in China have led to global growth concerns, thereby raising the appeal for defensive bets (read:
Healthcare ETFs Outperform Amid Rising Uncertainties
).
Better-than-expected earnings from Johnson & Johnson
JNJ
and UnitedHealth Group
UNH
have also provided some support. Despite the latest strength, the ultra-popular ETFs,
Health Care Select Sector SPDR Fund
XLV
,
Vanguard Health Care ETF
VHT
,
iShares U.S. Healthcare ETF
IYH
and
Fidelity MSCI Health Care Index ETF
FHLC
, are down more than 2% each over the past month.
The further price movement of these funds depends on earnings releases from some big names like Pfizer
PFE
, Merck
MRK
, Amgen
AMGN
, AbbVie
ABBV
and Gilead Sciences
GILD
that dominate returns. These firms are lined up to report their earnings in the next two weeks. All these stocks collectively account for 20.9% share in XLV, 20.3% in IYH, 17.9% in VHT and 21% 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 #3 and an Earnings ESP of -9.53%. The stock witnessed a negative earnings estimate revision of three cents for the to-be-reported quarter over the past seven days. It delivered an earnings surprise of 19.79%, on average, in the past four quarters and has a VGM Score of A. Pfizer is scheduled to report earnings on May 3, before the opening bell.
Merck is expected to report results on Apr 28 before market open. It has a Zacks Rank #3 and an Earnings ESP of +3.36%. The stock witnessed a negative earnings estimate revision of four cents over the past seven days for the to-be-reported quarter. Additionally, the stock delivered an average beat of 5.33% in the last four quarters. 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 +2.58%. It witnessed a positive earnings estimate revision of a penny over the past seven days for the quarter to be reported. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The earnings surprise track over the past four quarters is strong, with the beat being 3.63%, on average. The stock has a VGM Score of B. Amgen will report earnings on Apr 27.
AbbVie has a Zacks Rank #3 and an Earnings ESP of +0.18%. It saw a positive earnings estimate revision of a couple of cents over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 2.55%, on average, in the last four quarters. The stock has a VGM Score of B. The company is scheduled to report on Apr 29 before the opening bell.
Gilead is expected to release earnings on Apr 28 after market close. It has a Zacks Rank #3 and an Earnings ESP of +5.69%. The stock saw a negative earnings estimate revision of four cents over the seven days for the to-be-reported quarter. Gilead’s earnings surprise was 1.60%, on average, over the last four quarters. Gilead has a VGM Score of B.
Summing Up
The healthcare sector is expected to witness substantial earnings growth of
10.3%
in the first quarter. In particular, FHLC has a Zacks ETF Rank #3 while the remaining three have a Zacks ETF Rank #1.
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