Tag Archives: zacks-consensus

Pharma ETFs To Buy On String Of Q3 Earnings Beats

Like in the past few quarters, the healthcare sector continued to impress with its earnings in Q3. This is especially true as total earnings for 78.8% of the sector’s total market capitalization are up 12.5% on revenue growth of 8.4%, with earnings and revenue beat ratios of 83.3% and 61.1%, respectively. In fact, the sector is leading the way higher in terms of beating revenue estimates, where the overall growth picture of the S&P 500 is lagging. Among the most notable players, Johnson & Johnson (NYSE: JNJ ) was the first major drug company to report earnings on October 13, followed by Eli Lilly and Company (NYSE: LL ) on October 22. The other three major U.S. drug companies – Pfizer (NYSE: PFE ), Merck (NYSE: MRK ) and Bristol-Myers Squibb Company (NYSE: BMY ) – reported on October 27. All these industry primes outpaced our earnings estimates as well as raised their full-year outlook, while some missed on the revenue front. Johnson & Johnson’s Earnings in Focus The world’s biggest maker of healthcare products continued its long streak of earnings beats despite currency headwinds, which were responsible for the revenues missing our estimates. Earnings per share came in at $1.49, a nickel above the Zacks Consensus Estimate, but 7.4% lower than the year-ago earnings. Revenues slid 7.4% year over year to $17.1 billion and fell shy of the Zacks Consensus Estimate of $17.4 billion. In spite of the fact that a strong U.S. dollar would remain a major drag on international revenue growth, the company raised the lower end of the earnings per share guidance range to $6.15-6.20 from $6.10-6.20. The new midpoint is above the Zacks Consensus Estimate of $6.16 at the time of revising the guidance, reflecting confidence in its future growth. JNJ has gained 6.4% to-date since its earnings announcement. Pfizer’s Earnings in Focus The U.S. drug giant topped the Zacks Consensus Estimate for the top and the bottom lines, and raised its guidance for the fiscal 2015. Earnings per share of 60 cents and revenues of $12.01 billion were ahead of our estimates by a nine cents and $0.65 billion, respectively. Notably, earnings per share rose 5%, while revenues slid 2% year over year. Based on the earnings beat, Pfizer raised its revenue and earnings outlook for fiscal 2015. The company now expects earnings per share of $2.16-2.20 and revenues of $47.5-48.5 billion, compared to the previous outlook of $2.04-2.10 and $46.5-47.5 billion, respectively. The Zacks Consensus Estimate was $2.09 for earnings and $47.7 billion for revenues at the time of revising the guidance. Shares of PFE have moved up 2.6% since the earnings announcement. Merck’s Earnings in Focus Merck’s earnings per share came in at 96 cents, a nickel ahead of the Zacks Consensus Estimate and 6.7% higher than the year-ago earnings. Revenues slipped 4.6% year over year to $10.07 billion, and were slightly below the Zacks Consensus Estimate of $10.09 billion. For fiscal 2015, Merck raised the low end of the revenue guidance to $39.2-39.8 billion from $38.6-39.8 billion, including currency headwinds of $1 billion, and boosted the earnings per share outlook to $3.55-3.60 from $3.45-3.55. The Zacks Consensus Estimate at the time of the earnings release was pegged at $3.50 for earnings and $39.6 billion for revenues. The stock has added about 4.1% to-date post its earnings announcement. Bristol-Myers’ Earnings in Focus Bristol-Myers reported earnings per share of 39 cents, outpacing our estimate by four cents, but declining 13% from the year-ago earnings. Meanwhile, revenues climbed 4% to $4.07 billion and edged past the Zacks Consensus Estimate of $3.85 billion. Like the other drug makers, the company raised its full-year earnings per share guidance range to $1.85-1.90 from $1.70-$1.80, the midpoint of which was lower than our estimate of $1.82 at the time of the earnings announcement. Revenues are expected at $16.0-16.4 billion, which is at the low end of the Zacks Consensus Estimate of $16 billion. Shares of BMY are up 1.8% to-date since the earnings announcement. Eli Lilly’s Earnings in Focus Earnings of 89 cents at Eli Lilly strongly beat the Zacks Consensus Estimate by 13 cents and came in 22% higher than the year-ago earnings. Revenues slid 4% to $4.960 billion, and were marginally below our estimate of $4.962 billion. Eli Lilly also boosted its full-year outlook, with earnings per share revised upward from $3.20-3.30 to $3.40-3.45. Meanwhile, the company maintained its revenue guidance of $19.7-20.0 billion. The Zacks Consensus Estimate at the time of the earnings release was pegged at $3.27 per share for earnings and $19.9 billion for revenues. Shares of LLY have climbed 6.5% since the earnings announcement. ETF Angle The string of earnings beats and raised outlook has driven pharma ETFs higher from a one-month look. This trend is likely to continue for the rest of the year, given that the industry has a robust Zacks Industry Rank in the top 25% at the time of writing. Further, all these funds have a solid Zacks ETF Rank of 1 (Strong Buy) or 2 or (Buy), suggesting their continued outperformance (see all the Healthcare ETFs here ). iShares U.S. Pharmaceuticals ETF (NYSEARCA: IHE ) This ETF provides exposure to 43 pharma stocks by tracking the Dow Jones U.S. Select Pharmaceuticals Index. The five in-focus firms are among the top six holdings, accounting for 42.6% of total assets, suggesting heavy concentration. The product has $891.8 million in AUM and charges 43 bps in fees and expense. Volume is light, as the fund exchanges about 67,000 shares a day. IHE added about 6.9% over the past one month. PowerShares Dynamic Pharmaceuticals Portfolio ETF (NYSEARCA: PJP ) This is by far the most popular choice in the pharma space that follows the Dynamic Pharmaceuticals Intellidex Index. The product has AUM of about $1.6 billion, and sees good volume of around 233,000 shares a day. The fund charges 56 bps in fees and expenses from investors. Holding 23 stocks, PJP invests more than one-fourth of its assets in the in-focus five firms. The ETF surged about 8% over the trailing one-month period. Market Vectors Pharmaceutical ETF (NYSEARCA: PPH ) This ETF follows the Market Vectors US Listed Pharmaceutical 25 Index and holds 26 stocks in its basket. JNJ, PFE, MRK, LLY and BMY are among the top 12 holdings that make up for a combined 28.9% share. The product has amassed $338.6 million in its asset base, and trades in a moderate volume of about 72,000 shares a day. The expense ratio came in at 0.35%. The fund was up about 4% over the past one-month period. SPDR S&P Pharmaceuticals ETF (NYSEARCA: XPH ) This fund provides an almost equal-weight exposure to the pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With AUM of over $719.6 million, it trades in moderate volume of around 72,000 shares a day and charges 35 bps in fees a year. In total, the product holds 43 securities, with the in-focus five firms taking nearly 3% share each. The product has added 7.2% in the same period. Original Post

Better-Than-Expected Q3 Earnings Lift Industrial ETFs

Despite global growth slowdown, most of the major industrial players managed to beat earnings estimates in the past one week. This along with better-than-expected U.S. jobless claims and dovish comments from the European Central Bank President Mario Draghi has led the Dow Jones Industrial Average to record its best point and percentage gain in yesterday’s (October 22, 2015) trading session since September 8. However, revenue weakness was widespread among the industrial players. The blame goes largely to the stronger dollar as most of these companies have significant international exposure resulting in an unfavorable currency impact. Industrial Earnings in Focus General Electric Company (NYSE: GE ) Diversified industrial conglomerate General Electric posted stellar third quarter performance as it was able to surpass expectations for both earnings and revenues. The company’s operating earnings rose year over year to $3.3 billion or 32 cents a share in the quarter owing to stringent cost-cutting and simplification initiatives. Operating earnings exceeded the Zacks Consensus Estimate by 6 cents (read: Industrial ETFs in Focus on GE Restructuring Plans ). Revenues fell slightly to $31,680 million from $32,107 million in the year-earlier quarter due to lower Industrial segment and GE Capital revenues. However, total revenue topped the Zacks Consensus Estimate of $28,666 million. Organic revenue growth for the Industrial segment was 4% for the quarter. Shares of GE rose 2.6% since its earnings release on October 16 (as of October 22, 2015) (read: 3 Industrial ETFs to Play on GE Q3 Earnings Beat ). 3M Company (NYSE: MMM ) Another major conglomerate, 3M Company reported earnings of $2.05 per share for third-quarter 2015, beating the Zacks Consensus Estimate of $2.01 and increasing 3.5% year over year. The decline in shares outstanding for the latest quarter boosted earnings per share Net sales during the quarter were $7,712 million, down 5.2% year over year and short of the Zacks Consensus Estimate of $7,895 million. The year-over-year decrease in sales was largely due to a significant negative foreign currency translation impact. However, the company achieved organic local-currency sales growth of 1.2%. 3M shares went up 4.1% in yesterday’s trading session post earnings release. Honeywell International Inc. (NYSE: HON ) Honeywell International’s adjusted earnings per share escalated 9.8% to $1.57 in the reported quarter, beating the Zacks Consensus Estimate of $1.55. The uptick in earnings was driven by improved cost management and margins. Revenues in third-quarter 2015 decreased 5% year over year to $9,611 million, missing the Zacks Consensus Estimate of $9,884 million. The decrease in revenues was due to the unfavorable foreign currency impact and divestiture of Friction Material. However, Honeywell delivered 1% core organic sales growth. Shares of the company rose 3.8% since its earnings release on October 16. Caterpillar Inc. (NYSE: CAT ) Mining and equipment behemoth Caterpillar posted disappointing results compared to its peers. The company’s third-quarter 2015 adjusted earnings plunged 56% to 75 cents per share, reflecting the ongoing weakness in mining and oil and gas industries. Earnings, however, came in line with the Zacks Consensus Estimate. Revenues declined 19% year over year to $10.96 billion in the quarter, failing to match the Zacks Consensus Estimate of $11.11 billion due to the unfavorable currency impact along with lower volumes. Nevertheless, shares of Caterpillar rose 2.9% following the earnings release in yesterday’s trading session. Union Pacific Corporation (NYSE: UNP ) The rail transportation operator, Union Pacific reported third-quarter 2015 earnings of $1.50 per share, which came in well above the Zacks Consensus Estimate of $1.43. Earnings, however, declined 2% on a year-over-year basis. Revenues decreased 10% year over year to $5.56 billion in the third quarter, falling short of the Zacks Consensus Estimate of $5.65 billion. A 10% decline in freight revenues hurt the top line. Further, declining coal shipments weighed on the railroad operator’s results yet again. However, shares of the company rose 3.8% following its results in yesterday’s trading session. ETF Impact The upward movement in major industrial stocks caused the shares of industrial ETFs to trade in the green in the past five days (as of October 22, 2015). Below we discuss three of these ETFs having a sizeable exposure to the above stocks. The Industrial Select Sector SPDR ETF (NYSEARCA: XLI ) This product provides exposure to 66 industrial stocks by tracking the Industrial Select Sector Index. General Electric occupies the top spot with 11.5% allocation, while 3M, Caterpillar, Honeywell and Union Pacific have a combined exposure of roughly 16.7% in the fund. XLI has garnered $7 billion in assets and trades in a heavy volume of 10.9 million shares per day. It has a low expense ratio of 0.15%. The product gained 3.4% in the past five days and currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. The Vanguard Industrials ETF (NYSEARCA: VIS ) This fund follows the MSCI US IMI Industrials 25/50 index and holds about 345 securities in its basket. Of these firms, GE occupies the top position with 11.5% share, while 3M, Honeywell and Union Pacific together comprise 10.8% of the fund’s assets. The fund manages nearly $2 billion in its asset base and charges only 12 bps in annual fees. Volume is moderate as it exchanges roughly 105,000 shares a day on average. The product returned 2.6% in the past five days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. The iShares U.S. Industrials ETF (NYSEARCA: IYJ ) IYJ tracks the Dow Jones U.S. Industrials Index to provide exposure to 213 U.S. companies that produce goods used in construction and manufacturing. General Electric occupies the top spot in the fund with 11.4% share while 3M, Caterpillar, Honeywell and Union Pacific have a combined exposure of roughly 11.5%. The ETF manages an asset base of $587 million and trades in an average volume of 82,000 shares. The fund is slightly expensive with 43 basis points as fees. It rose 2.5% in the last five days and currently has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Link to the original post on Zacks.com

Banking Earnings Soft: Buy Financial ETFs On Value?

The financial sector, which accounts for around one-fifth of the S&P 500 index, had a sluggish- to-decent Q3. Weak capital market activities and global growth worries along with a low interest rate environment dealt a blow to the space. However, modest gains in loan growth amid low interest rates, investment banking activities thanks to surge in corporate actions and cost containment efforts helped the space to stay afloat in the quarter. As evident from the big bank earnings, the sector has been an average performer. Per the Zacks Earnings Trend issued on October 14, financial earnings are expected to jump 9.6% this quarter on 3.7% lower revenues. To be more specific, easy comparisons at Bank of America Corporation or BofA (NYSE: BAC ) is leading the sector. Excluding Bank of America, results would have been much more muted than it looks now. Earnings would fall in absence of BofA’s stellar growth (read: Guide to the 7 Most Popular Financial ETFs ). Let’s take a look at the big banks’ earnings which released lately. Big Bank Earnings in Focus JPMorgan (NYSE: JPM ) reported earnings of $1.32 per share missing the Zacks Consensus Estimate by 4.4% and the year-ago earnings by 2.9%. Managed net revenue of $23.5 billion in the quarter was down 6% from the year-ago quarter. It also compared unfavorably with the Zacks Consensus Estimate of $23.8 billion. Goldman (NYSE: GS ) earned $2.90 per share in Q3, falling short of the Zacks Consensus Estimate of $3.08 per share and declining from the year-ago figure of $4.57. The shortfall in earnings reflected a fall in revenues, hurt by lower trading activity in the quarter, be it bonds, currencies or commodities (read: 3 Sector ETFs Hit Hard by the Market Sell-off ). Net revenue dived 18% year over year to $6.9 billion for the quarter. Revenues also lagged the Zacks Consensus Estimate of $7.3 billion. Lower net interest as well as non-interest income weighed on the top line. Citigroup Inc.’s (NYSE: C ) adjusted earnings per share of $1.31 for the quarter outpaced the Zacks Consensus Estimate of $1.29. Further, earnings compared favorably with the year-ago figure of $0.95 per share. Adjusted revenues of Citigroup declined 8% year over year to $18.5 billion. Also, the revenue figure missed the Zacks Consensus Estimate of $18.76 billion. Wells Fargo (NYSE: WFC ) earned $1.05/share in 3Q15 beating the Zacks Consensus Estimate by a penny. The reported figure was also above the year-ago number of $1.02 per share. The quarter’s total revenue came in at $21.9 billion, outpacing the Zacks Consensus Estimate of $21.5 billion. Moreover, revenues rose 3.3% year over year. Bank of America Corporation’s third-quarter earnings of $0.37 per share outdid the Zacks Consensus Estimate of $0.34. Further, the bottom line witnessed a significant improvement from net loss of $0.04 incurred in the prior-year quarter. Net revenue of $20.7 billion was down 2% year over year and met the Zacks Consensus Estimate. ETF Impact Despite a run of listless results from banks this week, the concerned ETFs buoyed up on the recent Fed-induced optimism. Most U.S. financial ETFs returned at least 1% since the earnings came out (as of October 15, 2015). All the aforementioned companies have considerable exposure in funds like the i Shares U.S. Financial Services ETF (NYSEARCA: IYG ) , the PowerShares KBW Bank Portfolio ETF (NYSEARCA: KBWB ) , the Financial Select Sector SPDR ETF (NYSEARCA: XLF ) , the iShares U.S. Broker-Dealers ETF (NYSEARCA: IAI ) and the Vanguard Financials ETF (NYSEARCA: VFH ) . All the funds are in green post big banks’ results, having returned in the range of 1─1.8% (as of October 15, 2015). It seems that investors are paying more heed to the market rally which could boost the weakling of this quarter – trading activities, going forward. The bond market is also displaying a strong trend on a dovish Fed and a delayed rate hike possibility. This could go in favor banks’ client activity in the fourth quarter. In any case, sooner or later, the U.S. economy is due for a lift-off and U.S. banks are now much more well-balanced than they were at the time of the last recession. All the aforementioned ETFs apart from IAI have a Zacks ETF Rank # 2 (Buy), sport compelling valuation and thus emerge as better plays than an individual stock pick. Link to the original post on Zacks.com