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Solid Q1 Earnings Fail To Boost Pharma ETFs

Like the past several quarters, the healthcare sector has impressed with strong Q1 earnings. This is especially true as total earnings for 79.2% of the sector’s total market capitalization are up 8.8% on revenue growth of 11.2%, with earnings and revenue beat ratios of 80% and 70%, respectively. In fact, healthcare is the fourth best performing sector in terms of earnings growth trailing autos, construction, and consumer discretionary. Among the most notable players, Johnson & Johnson (NYSE: JNJ ) was the first major drug company to report earnings on April 19, followed by Eli Lilly and Company (NYSE: LLY ) and Bristol-Myers Squibb Company (NYSE: BMY ) on April 26 and April 28, respectively. Two other major U.S. drug companies – Pfizer (NYSE: PFE ) and Merck (NYSE: MRK ) – reported on May 3 and May 5, respectively. These industry primes posted solid results raising their full-year outlook that boosted investors’ confidence in the space. Notably, Eli Lilly missed our earnings estimates while Merck lagged on the revenue front. Johnson and Johnson Earnings in Focus The world’s biggest maker of healthcare products continued its long streak of earnings beat and beat our estimate on the top line buoyed by strong prescription drug revenues and a weakening dollar. Earnings per share came in at $1.68, four cents ahead of the Zacks Consensus Estimate and 7.7% higher than the year-ago earnings. Revenues inched up 0.6% year over year to $17.5 billion and edged past the Zacks Consensus Estimate of $17.42 billion (read: Healthcare ETFs to Buy on Blockbuster J&J Q1 Results ). Johnson & Johnson raised its guidance for fiscal 2016. The company now expects revenues in the range of $71.2-$71.9 billion compared with the previous forecast of $70.8-$71.5 billion. Additionally, the earnings per share guidance has been raised from $6.43-$6.58 to $6.53-$6.68. The Zacks Consensus Estimate at the time of the earnings release was pegged at $71.5 billion for revenues and $6.52 for earnings per share. These were higher than the mid-point of the company’s projection. JNJ has gained 0.2% to date since its earnings announcement. Pfizer Earnings in Focus The U.S. drug giant also topped the Zacks Consensus Estimate for both the top and the bottom lines, and raised the guidance for fiscal 2016. Earnings per share of 67 cents and revenues of $13.0 billion were ahead of our estimates by 12 cents and $1.0 billion, respectively. Notably, earnings per share grew 32% while revenues jumped 20% year over year. For fiscal 2016, Pfizer upped its revenue guidance to $51-53 billion from $49-$51 billion and earnings per share guidance to $2.38-$2.48 from $2.20-$2.30. The mid-points were much higher than the Zacks Consensus Estimate of $51.3 billion for revenues and $2.29 for earnings per share at the time of the earnings release. Shares of PFE are down 0.4% since the earnings announcement. Merck Earnings in Focus Earnings per share came in at 89 cents, four cents ahead of the Zacks Consensus Estimate and 4.7% higher than the year-ago earnings. Revenues slipped 1.2% year over year to $9.3 billion, and were slightly below the Zacks Consensus Estimate of $9.5 billion. Merck now expects earnings per share in the range of $3.65-$3.77 and revenues in the band of $39.0-$40.2 billion for 2016. This is in contrast with the previous guidance of $3.60-$3.75 and $38.7-$40.2 billion, respectively. The Zacks Consensus Estimate at the time of the release was pegged at $3.71 for earnings per share and $40.1 billion for revenues. The stock has lost about 1.3% following its earnings announcement. Bristol-Myers Earnings in Focus Bristol-Myers reported earnings per share of 74 cents, outpacing our estimate by 8 cents and increasing 4% from the year-ago quarter. Also, revenues rose 9% to $4.39 billion and edged past the Zacks Consensus Estimate of $4.24 billion. Like the other drug makers, the company also revised its earnings per share outlook upward to $2.50-$2.60 from $2.30-$2.40 for fiscal 2016. The low end was much higher than our estimate of $2.42 at the time of the earnings announcement. Revenues are expected to grow in the low double-digit range. Shares of BMY are down 1.5% to date since the earnings announcement. Eli Lilly Earnings in Focus Earnings of 83 cents at Eli Lilly missed the Zacks Consensus Estimate by a couple of cents and came in 5% lower than the year-ago earnings. Revenues grew 5% to $4.86 billion but fell short of our estimate of $4.87 billion. However, Eli Lilly raised its 2016 earnings per share guidance to $3.50-$3.60 from $3.45-$3.55 and revenue guidance to $20.6-$21.1 billion from $20.2-$20.7 billion. The Zacks Consensus Estimate at the time of the earnings release was pegged at $3.55 for earnings and $20.7 billion for revenues. Shares of LLY have tumbled 3.41% since the earnings release. ETF Angle The string of earnings beat and upbeat outlook failed to boost pharma stocks and ETFs as the industry is grappling with drug pricing issues. Below, we have highlighted the ETFs in detail: 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 $1.1 billion and sees good volume of around 192,000 shares a day. The fund charges 56 bps in fees and expenses from investors. Holding 23 stocks, the fund invests over 5% share each in the in-focus five firms. The ETF shed about 7.4% over the past 10 days and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook. iShares U.S. Pharmaceuticals ETF (NYSEARCA: IHE ) This ETF provides exposure to 42 pharma stocks by tracking the Dow Jones U.S. Select Pharmaceuticals Index. The in-focus firms occupy the top five holdings in the basket accounting for combined 40.6% of total assets, suggesting heavy concentration. The product has $607.8 million in AUM and charges 45 bps in fees and expense. Volume is moderate as it exchanges about 52,000 shares a day. The fund has lost 7.9% over the past 10 days and has a Zacks ETF Rank of 3 with a Medium risk outlook. SPDR S&P Pharmaceuticals ETF (NYSEARCA: XPH ) This fund provides exposure to the pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With AUM of over $465.9 million, it trades in moderate volume of around 190,000 shares a day and charges 35 bps in fees a year. In total, the product holds 40 securities with the in-focus five firms taking nearly 5% share each. The product was down 9.73% in the same period and has a Zacks ETF Rank of 3 with a Medium risk outlook. Market Vectors Pharmaceutical ETF (NYSEARCA: PPH ) This ETF follows the MVIS US Listed Pharmaceutical 25 Index and holds 26 stocks in its basket. Pfizer, Bristol-Myers, Johnson & Johnson and Merck make up for over 5% share each while Eli Lilly accounts for 4.7% of assets. The product has amassed $261.3 million in its asset base and trades in a moderate volume of about 105,000 shares a day. Expense ratio came in at 0.36%. The fund has lost 5.3% over the past 10 days. It has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook. Link to the original post on Zacks.com

Telecom ETFs Falling On Lackluster Earnings

The year has been rather mediocre for the telecom industry with lukewarm results coming up amid turbulent economic conditions. The industry has evolved as an intensely contested space where success depends largely on technical superiority, quality of services and scalability. Cut-throat pricing competition has put pressure on margins this earnings season. However, mixed results and global market concerns notwithstanding, the overall sentiment for the U.S. telecommunications industry for the rest of 2016 is positive. Telecommunications is one of the few industries to have managed to undergo rapid technological improvement even during depression. In this era of digitization and technology, the ever-growing demand for technologically superior products should see the sector through. Below we have highlighted in greater detail earnings of some of the major Telecom companies which really drive this sector’s outlook. (read more: What Lies Ahead for Telecom ETFs in 2016? ). Telecom Earnings in Details U.S. telecom behemoth AT&T Inc. (NYSE: T ) reported impressive results beating on both the top and bottom line. Adjusted earnings per share of 72 cents beat the Zacks Consensus Estimate of 69 cents. Quarterly total revenue increased 24.4% year over year to $40,535 million, outpacing the Zacks Consensus Estimate of $40,493 million. AT&T has gained 2.1% since reporting earnings (as of May 4, 2016). Although the company reported strong results, its U.S. postpaid wireless subscriber addition of 129,000 was down a significant 70.7% year over year. In contrast, U.S. telecom giant Verizon Communications Inc. (NYSE: VZ ) reported mixed financial results wherein the top line lagged the Zacks Consensus Estimate, while the bottom line just met the same. Verizon’s adjusted earnings per share moved up almost 3.9% year over year to $1.06, in line with the Zacks Consensus Estimate. Quarterly revenue increased 0.6% year over year to $32,171 million, but missed the Zacks Consensus Estimate of $32,367 million. The stock has fallen 1.8% since reporting earnings (as of May 4, 2016). CenturyLink Inc. ‘s (NYSE: CTL ) first-quarter 2016 adjusted earnings per share of 71 cents surpassed the Zacks Consensus Estimate of 68 cents and were up 6% year over year. However, quarterly total revenue of $4,401 million fell 1.1% from the prior-year quarter and missed the Zacks Consensus Estimate of $4,426 million. The stock was down 4.71% during after-hours trading on May 4, 2016. ETFs in Focus Thanks to mixed results, telecom ETFs with considerable exposure to the three stocks above were all in the red in the last 5 trading sessions (as of May 4, 2016). Below we discuss four of these that will be in focus in the coming days (see all Telecommunication ETFs here ). iShares U.S. Telecommunications ETF (NYSEARCA: IYZ ) IYZ tracks the Dow Jones U.S. Select Telecommunications Index. The fund manages assets worth nearly $617.4 million and has an average trading volume of roughly 502,000 shares a day. The fund charges an expense ratio of 45 basis points a year. The fund holds 25 stocks and has more than one-fifth of its assets in the top 2 holdings while the others have less than 5.7% exposure. Among individual holdings, top stocks in the ETF include AT&T, Verizon and CenturyLink with asset allocation of 10.7%, 9.9% and 5.5%, respectively. The four major sectors of this ETF are Integrated Telecom, Wireless Telecom, Alternative Carriers and Communications Equipment with asset holdings of 50.5%, 24.7%, 18.2% and 3.8%, respectively. The product lost 0.9% in the past 5 days and currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Fidelity MSCI Telecommunications Services Index ETF (NYSEARCA: FCOM ) This ETF tracks the performance of the MSCI USA IMI Telecommunication Services 25/50 Index. The fund manages assets worth nearly $164.8 million and has an average trading volume of roughly 64,000 shares a day. The fund charges an expense ratio of 12 basis points a year. The fund holds 32 stocks and has a concentrated approach in the top 10 holdings with 67.4% of the asset base invested in them. Among individual holdings, AT&T, Verizon and CenturyLink number among the top three with asset allocation of 22%, 20.8% and 4.3%, respectively. Diversified Telecommunication Services and Wireless Telecommunication Services are the two major sectors of this ETF with asset holdings of 84.9% and 15.1%, respectively. The product lost 1% in the past 5 days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. iShares Global Telecommunications ETF (NYSEARCA: IXP ) This ETF tracks the S&P Global 1200 Telecommunications Services Sector Index. The fund has nearly $418.2 million of assets under management and an average trading volume of roughly 41,000 shares a day. The fund charges an expense ratio of 48 basis points a year. The fund holds 32 stocks in its portfolio and has a concentrated approach in the top 10 holdings with approximately 71.3% of the asset base invested in them. Among individual holdings, top stocks in the ETF include AT&T and Verizon with asset allocation of 18.5% and 15.9%, respectively. CenturyLink holds weight of 1.3%. Integrated Telecommunication, Wireless Telecommunication and Alternative Carriers are the three major sectors with asset holdings of 72.9%, 25.7% and 1.2%, respectively. It fell almost 1.8% in the last 5 days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. Vanguard Telecommunication Services ETF (NYSEARCA: VOX ) This ETF seeks to track the performance corresponding to the benchmark MSCI U.S. Investable Market Telecommunication Services 25/50 Index. It has assets under management of nearly $1.5 billion and an average trading volume of roughly 135,000 shares a day. The fund charges an expense ratio of 10 basis points a year. The fund holds 31 stocks in its portfolio and has a concentrated approach in the top 10 holdings with 69.6% of the asset base invested in them. Among individual holdings, top stocks in the ETF are AT&T and Verizon with a combined share of almost 50%. CenturyLink has the third highest share with 4.6% weight. Integrated Telecommunication Services, Alternative Carriers and Wireless Telecommunication Services are the three major sectors with asset holdings of 67.1%, 20.3% and 12.5%, respectively. The fund lost 0.9% in the last 5 days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. Link to the original post on Zacks.com

SunPower Keeps Full-Year View Despite $400 Million Q2 Guidance Lag

Late Thursday, SunPower ( SPWR ) kept its full-year outlook despite offering Q2 guidance that lagged Wall Street’s view by $400 million, indicating a back-end-loaded 2016 for the No. 2 solar developer, says Credit Suisse analyst Patrick Jobin. SunPower and First Solar ( FSLR ) stocks were both flat in early afternoon trading on the stock market today , but IBD’s 26-company Energy-Solar industry group was down more than 1%, touching a three-year low for the third straight day. SunPower-First Solar yieldco 8point3 Energy Partners ( CAFD ) stock was down 2%. For Q1, SunPower reported $433.6 million in sales ex items, topping analysts’ model for $328.5 million, boosted by revenue recognized from the sale to 8point3 of the 50-megawatt Hooper Project. Solar firms form yieldcos to own their operating assets. But SunPower’s 30-cent loss per share ex items was wider than the 20-cent projection of 16 analysts polled by Thomson Reuters, and that swung from a 13-cent gain in the year-earlier quarter. SunPower said it deployed 236 megawatts in the quarter, above guidance for 180 MW to 210 MW and up 8% year over year. Of that, Jobin estimates 75 MW was residential, 35 MW commercial and 205 MW power plant. The latter two segments missed views for 43 MW and 210 MW. Residential deployments fell 23% on Japanese weakness, partially offset by 50% growth in the U.S. market, Jobin wrote. But lease bookings (37% of U.S. deployments) fell 18%. For the current quarter, SunPower guided to $310 million to $360 million in sales, down 11% year over year at the midpoint. That was far off the analysts’ model for $722 million. SunPower didn’t offer an earnings view, but the consensus expected 22% growth to 22 cents. During Q2, SunPower expects to deploy 360 MW to 385 MW. For the year, the company maintained its view for 1.6 gigawatts to 1.9 GW and $3.2 billion to $3.4 billion in sales “implying a second-half weighted year,” Jobin wrote. SunPower also shed light on 650 MW in projects. The lion’s share, 436 MW, will be completed in Q4. The project list includes 241 MW slated for sale to 8point3, 151 MW for third parties and 255 MW to be divvied up. The company also announced a $200 million revolver facility to focus on commercial and small-scale utility projects that will be able to fund up to 100% of construction projects. Jobin retained his outperform rating and 32 price target on SunPower stock, which was near 17 Friday afternoon.