ETFs to Gain on JNJ's Solid Q1 Earnings & Upbeat Outlook
Shares of JNJ rallied 6.1% following the earnings announcement. Investors should tap the company's growth prospects through ETFs with the largest allocation to this diversified drug maker. These include iShares U.S. Pharmaceuticals ETF IHE, VanEck Vectors Pharmaceutical ETF PPH, Health Care Select Sector SPDR Fund XLV, iShares U.S. Healthcare ETF IYH and First Trust Nasdaq Pharmaceuticals ETF FTXH.
JNJ's earnings per share came in at $2.77, which beat the Zacks Consensus Estimate of $2.66 but declined 1.8% from the year-ago earnings. Revenues grew 5.8% year over year to $23.74 billion and outpaced the Zacks Consensus Estimate of $22.80 billion (see: all the Healthcare ETFs here).
Innovative Medicines sales advanced 4.9%, while sales from MedTech devices jumped 7.3%. Sales of JNJ's top-selling blood cancer treatment, Darzalex, jumped 23% to $3.5 billion, while Xarelto generated $621 million in sales, up 5.6% year over year. However, sales of psoriasis drug Stelara declined 42.7% to $1.65 billion due to the launch of several biosimilar versions. Invega Sustenna sales also dropped 5.9% to $992 million.
Johnson & Johnson raised its revenue guidance for fiscal 2025 to $93.2-$93.6 billion from $91.0-$91.8 billion, indicating year-over-year growth of 5.1%-5.6% versus the prior expectation of 2.6%-3.6%. The company also lifted its adjusted earnings per share guidance to $10.80-$10.90 from $10.50-$10.70 due to a stronger top-line performance and a reduced expected impact from tariffs. The drugmaker now anticipates a $200 million tariff impact in 2025, down from its previous estimate of $400 million.
Following the upbeat results, Stifel has raised its price target on Johnson & Johnson to $165.00 from $155.00, citing that multiple new product launches have driven the company's confidence.
The company also lifted its quarterly dividend to $1.30 per share from $1.24, marking its 63rd consecutive annual increase. At this new rate, the annual dividend totals $5.20 per share, up from $4.96.
ETFs in Focus
iShares U.S. Pharmaceuticals ETF (IHE)
iShares U.S. Pharmaceuticals ETF provides exposure to 36 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 a 22.7% share. iShares U.S. Pharmaceuticals ETF has $561.2 million in AUM and charges 39 bps in fees and expenses. Volume is good at about 54,000 shares a day. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Pharma ETFs in Focus on Trump's Drug Price Overhaul).
VanEck Vectors Pharmaceutical ETF (PPH)
VanEck Vectors Pharmaceutical ETF follows the MVIS US Listed Pharmaceutical 25 Index, which measures the performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well as production, marketing and sales of pharmaceuticals. It holds 25 stocks in its basket, with Johnson and Johnson occupying the second position at 10.3% of the assets. VanEck Vectors Pharmaceutical ETF has amassed $534.6 million in its asset base and trades in a good volume of about 437,000 shares a day. The expense ratio is 0.36%. VanEck Vectors Pharmaceutical ETF has a Zacks ETF Rank #3 with a Medium risk outlook.
Health Care Select Sector SPDR Fund (XLV)
Health Care Select Sector SPDR Fund is the most popular healthcare ETF and follows the Health Care Select Sector Index. It holds 60 securities in its basket, with JNJ taking the second spot at 7.7% of the assets. Pharma, healthcare equipment & supplies, and healthcare providers and services have a significant share at 31.2%, 24.7% and 17.9%, respectively. Health Care Select Sector SPDR Fund manages $33.8 billion in its asset base and trades in a heavy volume of around 14 million shares. The expense ratio comes in at 0.08%. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: House Passes Trump's "Big, Beautiful Bill": ETFs in Focus).
iShares U.S. Healthcare ETF (IYH)
iShares U.S. Healthcare ETF offers exposure to 103 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies by tracking the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. Johnson and Johnson is the top firm, accounting for 7.5% of the total assets. In terms of industrial exposure, pharma takes the top spot at 31.1%, followed by healthcare equipment (23.6%) and biotech (20.3%). iShares U.S. Healthcare ETF has amassed $2.7 billion in its asset base while charging 39 bps in annual fees. It trades in a good volume of around 528,000 shares a day and has a Zacks ETF Rank #3 with a Medium risk outlook.
First Trust Nasdaq Pharmaceuticals ETF (FTXH)
First Trust Nasdaq Pharmaceuticals ETF offers exposure to U.S. companies within the pharmaceuticals industry and tracks the Nasdaq US Smart Pharmaceuticals Index. It holds 49 securities in its basket, with JNJ occupying the top spot at 7.5% of the assets. FTXH has a lower AUM of $14.6 million and an average daily volume of 14,000 shares. First Trust Nasdaq Pharmaceuticals ETF charges 60 bps in annual fees and has a Zacks ETF Rank #3.
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Johnson & Johnson (JNJ): Free Stock Analysis Report
iShares U.S. Healthcare ETF (IYH): ETF Research Reports
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
VanEck Pharmaceutical ETF (PPH): ETF Research Reports
First Trust NASDAQ Pharmaceuticals ETF (FTXH): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
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