Healthcare ETFs Set To Soar As Q3 Earnings Unfold

Thanks to encouraging industry trends and hopes of a favorable policy environment, healthcare is one of the top-performing sectors this year. Notably, popular ETFs like 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 at least 23% so far (read: Healthcare ETF Hits New 52-Week High).

The bullish trend is likely to continue heading into the Q3 earnings season as some big names like Pfizer PFE, Merck MRK, Amgen AMGN, AbbVie ABBV, Gilead Sciences GILD and Bristol-Myers Squibb BMY are lined up to report this week and in the next. All these stocks collectively account for 27.6% share in XLV, 26.5% in IYH, 24.2% in VHT and 24% in FHLC.

Let's dig deeper into the earnings picture of these companies that would drive the performance of the above-mentioned funds in the coming days:

According to the our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Inside Our Surprise Prediction of These Stocks

Pfizer has a Zacks Rank #3 and an Earnings ESP of +0.94%, indicating a reasonable chance of beating estimates this quarter. The stock has seen no earnings estimate revision for the yet-to-be-reported quarter but delivered an average negative earnings surprise of 0.39% for the past four quarters. It has an impressive Value Style Score of B but a Growth and Momentum Style Score of C and F, respectively, looks disappointing. Pfizer is scheduled to report earnings on Oct 31 before the opening bell.

Pfizer, Inc. Price, Consensus and EPS Surprise

Pfizer, Inc. Price, Consensus and EPS Surprise | Pfizer, Inc. Quote

Merck is expected to report results on Oct 27 before the market opens. It has a Zacks Rank #3 and an Earnings ESP of +0.61%. The stock delivered positive earnings surprises in the last four quarters, with an average beat of 8.11% but witnessed a negative earnings estimate revision of four cents over the past 90 days for the to-be-reported quarter. Merck has a strong Momentum Style Score of A, and a Value and Growth Style Score of C each.

Merck & Company, Inc. Price, Consensus and EPS Surprise

Merck & Company, Inc. Price, Consensus and EPS Surprise | Merck & Company, Inc. Quote

Amgen carries a Zacks Rank #3 and has an Earnings ESP of -0.41%, indicating less chances of beating estimates this quarter. Though the earnings surprise track over the past four quarters is robust with an average positive surprise of 5.84%, Amgen witnessed negative earnings estimate revision of three cents over the past 90 days for the yet-to-be-reported quarter. The stock has a solid Value and Momentum Style Score of B and A, respectively, but the Growth Style Score of C looks dull. Amgen will report earnings on Oct 25 after market close (read: Should You Keep Your Portfolio Healthy with Biotech ETFs?).

Amgen Inc. Price, Consensus and EPS Surprise

Amgen Inc. Price, Consensus and EPS Surprise | Amgen Inc. Quote

AbbVie has a Zacks Rank #3 and an Earnings ESP of +0.08%. The company delivered positive earnings surprises in the last four quarters, with an average beat of 0.76% but saw negative earnings estimate revision by a couple of cents over the past three months for the to-be-reported quarter. The stock has a solid Value Style Score of B. But a Growth and Momentum Style Score of C and D, respectively, is unimpressive. The company is scheduled to report on Oct 27 before the opening bell.

AbbVie Inc. Price, Consensus and EPS Surprise

AbbVie Inc. Price, Consensus and EPS Surprise | AbbVie Inc. Quote

Gilead is expected to release earnings on Oct 26 after market close. It has a Zacks Rank #3 and an Earnings ESP of +0.23%, indicating a reasonable chance of beating estimates. Gilead delivered positive earnings surprises in two of the last four quarters, with an average beat of 6.38% and saw earnings estimate revision of a nickel over the past three months for the to-be-reported quarter. Though it has a solid Value Style Score of A, a Growth and Momentum Style Score of D and F, respectively, looks ugly (see: all the Healthcare ETFs here).

Gilead Sciences, Inc. Price, Consensus and EPS Surprise

Gilead Sciences, Inc. Price, Consensus and EPS Surprise | Gilead Sciences, Inc. Quote

Bristol-Myers will likely report earnings on Oct 26 before the opening bell. It has a Zacks Rank #3 and an Earnings ESP of +0.79%. The stock delivered positive earnings surprises in three of the past four quarters, with an average beat of 7.99%, and witnessed positive earnings estimate revision of a couple of cents for the to-be-reported quarter. It has a solid Growth Style Score of B but an unfavorable Value and Momentum Style Score of C and D, respectively.

Bristol-Myers Squibb Company Price, Consensus and EPS Surprise

Bristol-Myers Squibb Company Price, Consensus and EPS Surprise | Bristol-Myers Squibb Company Quote

Summing Up

With earnings surprises well in the cards, the healthcare sector is expected to witness earnings growth of 2.2% in the third quarter and has a strong Zacks Rank in the top 44%, suggesting further upside for healthcare ETFs. In particular, all the four ETFs have a Zacks ETF Rank #2 (read: Top Ranked Healthcare ETFs for Long Term Investors).

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Bristol-Myers Squibb Company BMY: Free Stock Analysis Report
 
Pfizer, Inc. PFE: Free Stock Analysis Report
 
Merck & Company, Inc. MRK: 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
 
Gilead Sciences, Inc. GILD: Free Stock Analysis Report
 
Amgen Inc. AMGN: Free Stock Analysis Report
 
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