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Healthcare ETFs in Focus Post JNJ's Q1 Earnings Results

Johnson & Johnson JNJ set the ball rolling for the pharma and medical device manufacturer space’s first-quarter 2021 earnings on Apr 20, before the opening bell. 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.

Earnings per share came in at $2.59, beating the Zacks Consensus Estimate of $2.31 and improving 12.6% from the year-ago quarter. Revenues grew 7.9% year over year to $22.3 billion and edged past the Zacks Consensus Estimate of $21.82 billion. The stronger performance was driven by strong sales for cancer drug Darzalex as well as sales of Stelara, a treatment for Crohn's disease and plaque psoriasis.

The company recorded 100 million in COVID-19 vaccine sales in the quarter and aims to deliver 100 million doses of the vaccine to the United States before the end of May, of which more than 17 million have already been distributed as of Apr 19. The vaccine will be available on a not-for-profit basis until the end of the pandemic (read: JNJ Vaccine Pause Gives Stay-at-Home ETFs a Shot in the Arm).

For 2021, Johnson & Johnson narrowed its revenue range from $90.5-$91.7 billion to $90.6-$91.6 billion, indicating year-over-year increase of 9.7-10.9%. Earnings per share guidance range has been revised from $9.40-$9.60 to $9.42-$9.57, representing year-over-year growth of 17.3-19.2%. The Zacks Consensus Estimate is pegged at $91.2 billion for revenues and $9.48 for earnings per share.

Separately, JNJ boosted its quarterly dividend by 5% to $1.06 a share from $1.01 per share, with the new dividend payable on Jun 8 to shareholders of record on May 25.

Following the results, JNJ shares rose 2.3% on the day. The stock currently has a Zacks Rank #3 (Hold) and VGM Score of B.

ETFs in Focus

Given this, investors should closely watch the movement of the stock and ETFs having the largest allocation to this diversified drug maker. Below we have highlighted them (see: all the Healthcare ETFs here).

iShares U.S. Pharmaceuticals ETF IHE

This ETF provides exposure to 42 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 22.7% share. The product has $358.4 million in AUM and charges 42 bps in fees and expenses. Volume is lower as it exchanges about 8,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook.

Health Care Select Sector SPDR Fund XLV

The most-popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $25.6 billion in its asset base and trades in heavy volume of around 8.6 million shares. Expense ratio comes in at 0.12%. In total, the fund holds 62 securities in its basket, with JNJ taking the top spot, accounting for 9.4% of the assets. Healthcare equipment and supplies accounts for 28.2% share from a sector look, while pharma, healthcare providers and services, and biotech have a double-digit exposure each. The product has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Are Healthcare ETFs Poised for a Comeback?).

iShares Evolved U.S. Innovative Healthcare ETF IEIH

This actively managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 250 stocks in its basket, JNJ is the top firm with a 9.9% allocation. The product has accumulated $36.4 million in its asset base and trades in a meager volume of 7,000 shares per day on average. It charges 18 bps in annual fees.

iShares U.S. Healthcare ETF IYH

This fund offers exposure to 125 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 8.5% of the total assets. In terms of industrial exposure, pharma takes the top spot at 26%, followed by healthcare equipment (25%) and biotech (16.5%). The product has amassed nearly $2.6 billion in its asset base and charges 43 bps in annual fees. It trades in a good volume of around 40,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Will J&J ETFs Suffer on Latest COVID-19 Vaccine Updates?).

Vanguard Health Care ETF VHT

This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 449 stocks in its basket. Of these, Johnson & Johnson occupies the top position with an 8% allocation. Pharma takes the largest share at 24.7%, while healthcare equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $14.3 billion and an average daily volume of about 219,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

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Johnson & Johnson (JNJ): 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
 
ISHARS-US PHARM (IHE): ETF Research Reports
 
ISHR-EUS INV HC (IEIH): ETF Research Reports
 
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