Healthcare ETFs To Watch On Johnson & Johnson Report [Health Care SPDR (ETF)]

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January 27, 2014 4:57pm NYSE:IHE NYSE:IYH

healthcare1Healthcare space is greatly befitting from the current favorable industry trends and robust performances by major drug companies in both pharma and biotech segments. This trend is further confirmed by the healthcare giant Johnson & Johnson’s (NYSE:JNJ) 


stronger-than-expected results for the fourth quarter.

Johnson and Johnson Results in Focus

Earnings per share came in at $1.24, beating the Zacks Consensus Estimate of $1.20 and improving from the year-ago earnings of $1.19 per share.

Revenues rose 4.5% to $18.36 billion, trumping the Zacks Consensus Estimate of $17.9 billion, despite the negative impact from currency fluctuations. The robust performance was driven by higher drugs sales and improved medical devices sales.

However, the company guided lower for 2014 as it sees earnings in the range of $5.75–$5.85 per share. Though this number is above 2013 reported earnings of $5.52 per share, it is slightly below the Zacks Consensus Estimate of $5.87 per share.

Market Impact

The weak guidance led to the 2.5% slump in JNJ shares in early hour trading but recovered slightly to down 1.1% at the close on solid results. This mixed performance puts healthcare ETFs in focus for the coming days, especially the funds having double-digit allocation to this baby products and biological drugs maker.

Investors should closely monitor the movement in these funds and could catch the opportunity from any surge in the JNJ pric. (see: all the Healthcare ETFs here).

ETFs in Focus

Health Care Select Sector SPDR Fund (NYSEARCA:XLV)

The most popular healthcare ETF on the market, XLV follows the S&P Health Care Select Sector Index. This fund manages about $8.7 billion in asset base and trades in heavy volume of roughly 5.7 million. Expense ratio came in at 0.18% annually. In total, the fund holds about 57 securities in its basket. Of these firms, JNJ takes the first spot, making up roughly 12.14% of the assets.

Pharma accounts for 45% share from a sector look while biotech, healthcare providers and services, and equipment and suppliers make up for double-digit exposure. The fund added 3.5% in the year-to-date time frame and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a ‘Low’ risk outlook.

iShares U.S. Healthcare ETF (NYSEARCA:IYH)

This fund provides exposure to 114 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s return at 11.34% of total assets. In terms of industrial exposure, Pharma takes the top spot at 48%, closely followed by biotech (21%), medical equipment (17%) and healthcare services (14%) (read: 3 Pharma ETFs Leading the Healthcare Sector).

The product has amassed nearly $2 billion in its asset base while charges 45 bps in annual fees. It trades in good volume of more than 246,000 shares a day, suggesting a relatively tight bid/ask spread. IYH gained 4.14% year-to-date and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a ‘Low’ risk outlook.

iShares U.S. Pharmaceuticals ETF (NYSEARCA:IHE)

This ETF tracks the Dow Jones U.S. Select Pharmaceuticals Index, giving investors exposure to the pharma segment of the broad healthcare world. The fund holds 36 stocks in its basket with Johnson and Johnson taking the top position at 11.48%.

The product has $594.8 million in AUM and charges 45 bps in fees and expense. Volume is light as it exchanges just 21,000 shares in hand a day. The fund is up 5.7% so far this year and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a ‘Low’ risk outlook.


This article is brought to you courtesy of Eric Dutram.


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