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Healthcare ETFs on Radar As Q1 Earnings Unfold

The healthcare sector has been benefiting from COVID-19 vaccines or treatment with many more to come. 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, have gained around 8% so far this year.

Better than-expected earnings results from Johnson & Johnson JNJ and UnitedHealth Group UNH have added to the strength. The world's biggest healthcare products’ maker continued its long streak of earnings beat and outpaced revenue estimates. However, the company tightened its full-year guidance. Meanwhile, UnitedHealth breezed past the Zacks Consensus Estimate on both earnings and revenues. The company also lifted its full-year earnings outlook (read: Healthcare ETFs in Focus Post JNJ's Q1 Earnings Results).

Further price movement of these funds depend on earnings releases from some big names like Pfizer PFE, Merck MRK, Thermo Fisher Scientific TMO, AbbVie ABBV, and Gilead Sciences GILD that dominate returns. These firms are lined up to report their earnings this week and the next. All these stocks collectively account for 19.3% share in XLV, 17.2% in IYH, 15.5% in VHT and 15.5% 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 +0.69%. The stock witnessed negative earnings estimate revision of four cents for the to-be-reported quarter over the past 30 days. It delivered earnings surprise of 7.18%, on average, in the past four quarters and has a VGM Score of B. Pfizer is scheduled to report earnings on May 4, before the opening bell.

Merck is expected to report results on Apr 29 before market open. It has a Zacks Rank #3 and an Earnings ESP of -2.71%. The stock witnessed negative earnings estimate revision of three cents over the past 30 days for the to-be-reported quarter. Additionally, the stock delivered an average beat of 11.55% in the last four quarters. Merck has a VGM Score of A (see: all the Healthcare ETFs here).

Thermo Fisher carries a Zacks Rank #3 and has an Earnings ESP of +0.25%. It has witnessed positive earnings estimate revision of a penny over the past 30 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 20.81%, on average. The stock has a VGM Score of A. Amgen will report earnings on Apr 29.

AbbVie has a Zacks Rank #3 and an Earnings ESP of -1.20%. It saw positive earnings estimate revision of a penny over the past month for the to-be-reported quarter and delivered earnings surprise of 4.11%, on average, in the last four quarters. The stock has a VGM Score of B. The company is scheduled to report on Apr 30 before the opening bell.    

Gilead is expected to release earnings on Apr 29 after market close. It has a Zacks Rank #3 and an Earnings ESP of +3.79%. The stock saw positive earnings estimate revision of 6 cents over the past month for the to-be-reported quarter. Gilead’s negative earnings surprise was 0.12%, on average, over the last four quarters. Gilead has a VGM Score of A (read: Are Healthcare ETFs Poised for a Comeback?).

Summing Up

The healthcare sector is expected to witness substantial earnings growth of 20.8% in the first quarter. In particular, FHLC has a Zacks ETF Rank #3 while the remaining three have a Zacks ETF Rank #2.

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UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
 
Johnson & Johnson (JNJ): Free Stock Analysis Report
 
Pfizer Inc. (PFE): Free Stock Analysis Report
 
Gilead Sciences, Inc. (GILD): Free Stock Analysis Report
 
Merck & Co., Inc. (MRK): Free Stock Analysis Report
 
Thermo Fisher Scientific Inc. (TMO): Free Stock Analysis Report
 
AbbVie Inc. (ABBV): Free Stock Analysis Report
 
SPDR-HLTH CR (XLV): ETF Research Reports
 
VIPERS-HLTH CR (VHT): ETF Research Reports
 
ISHARS-US HLTHC (IYH): ETF Research Reports
 
FID-H CARE (FHLC): ETF Research Reports
 
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