Tag Archives: zacks

Upbeat Aerospace And Defense Results Lift ETFs

A major part of the first-quarter earnings season is behind us and a combination of factors including oil price turbulence and global growth uncertainties have weighed on the results . Despite headwinds, aerospace and defense, a relatively smaller sector within the S&P 500, held up well this past quarter. However, it’s not surprising given the low estimates, which had fallen ahead of this reporting cycle. Aerospace and defense stocks have reported better-than-expected results despite sluggish growth numbers. As per the Zacks Earnings Trend report , earnings declined 6.6% while revenues increased 3.8% year over year. The earnings beat ratio of the aerospace and defense companies is 77.8%, while the revenue beat is 88.9% . The U.S. defense sector performed modestly on the back of elevated geopolitical risk, a recovering U.S. economy and strong commercial sales. Escalating geo-political tensions in Eastern Europe, the Middle East and Syria have forced several countries to step up their defense, in turn boosting demand for defense products. Moreover, the aerospace and defense industry has gained from fleet renewals at airlines worldwide. Demand for more fuel-efficient aircraft, a growing international market and increasing application of unmanned aircraft in warfare today have driven up sales in this sector. Below we have highlighted in greater detail the earnings of some of the major aerospace and defense companies which really drive this sector’s outlook. Quarterly Earnings in Focus Pentagon’s prime contractor, Lockheed Martin Corp. (NYSE: LMT ), reported an encouraging first quarter. It reported better-than-expected earnings and revenues with both beating the Zacks Consensus Estimate by 2.8% and 5.5%, respectively. Lockheed Martin raised its 2016 outlook and now expects earnings of about $11.50–$11.80 per share (earlier projection: $11.45–$11.75) on revenues of approximately $49.6 billion to $51.1 billion (earlier projection: $49.5 billion to $51 billion). The stock jumped after the earnings release on solid outlook, impressive revenue growth and potential share buybacks. Aerospace giant, The Boeing Company (NYSE: BA ) delivered first-quarter 2016 adjusted earnings of $1.74 per share, missing the Zacks Consensus Estimate by 3.9%. Earnings also decreased 12% year over year. Revenues came in at $22.63 billion for the quarter, exceeding the Zacks Consensus Estimate of $21.24 billion and increasing 2% from the year-ago level. For 2016, the company still expects earnings to be in the range of $8.15−$8.35 per share on revenues of $93−$95 billion. Investors reacted positively to the company’s results. Northrop Grumman Corp. (NYSE: NOC ) reported upbeat first-quarter 2016 results with revenues and earnings beating the Zacks Consensus Estimate by 0.8% and 12.1%, respectively. The maker of the current B-2 bomber and Global Hawk unmanned planes expects earnings to be in the range of $10.40 to $10.70 per share (prior projection: $9.90–$10.20) on revenues of $23.5 billion to $24 billion in 2016. The stock gained significantly after the company released its results. General Dynamics Corp. ’s (NYSE: GD ) first quarter earnings of $2.34 per share topped both the Zacks Consensus Estimate and the year-ago figure of $2.14 by 9.3%. Revenues of $7.7 billion beat the Zacks Consensus Estimate by 0.4% benefiting from strong demand for defense products during the quarter. Investors reacted positively with the stock gaining after the company released its results. United Technologies Corporation (NYSE: UTX ) reported first-quarter adjusted earnings of $1.47 per share, up 2.1% year over year. The figure also surpassed the Zacks Consensus Estimate of $1.39. Quarterly revenues of $13.4 billion also beat the Zacks Consensus Estimate of $13 billion. However, volatility in foreign currency adversely impacted the revenues of most of the company’s segments during the reported quarter. The company reaffirmed its 2016 guidance. The stock gained post releasing results. ETFs to Play The gains in aerospace and defense companies have put the spotlight on their ETFs. Below, we have these ETFs in detail: iShares U.S. Aerospace & Defense ETF (NYSEARCA: ITA ) The fund, tracking the Dow Jones U.S. Select Aerospace & Defense Index, holds 37 securities in its basket with Boeing, United Technologies, Lockheed Martin, General Dynamics and Northrop Grumman being the top five stocks. All of them together account for more than 38% of the fund assets. With an asset base of nearly $682.7 million, the fund trades in moderate volumes of roughly 83,000 shares a day and charges an annual fee of 45 bps per year. The fund returned 1.25% in the last 10 days (as of May 5, 2016) and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook . PowerShares Aerospace & Defense Portfolio (NYSEARCA: PPA ) PPA follows the SPADE Defense Index, with 50 companies involved in the development, manufacturing, operations and support of U.S. defense, homeland security and aerospace operations. Lockheed Martin, Boeing, United Technologies, General Dynamic and Northrop Grumman are among the top 10 holdings and together occupy almost one third of total fund assets. The product has managed to garner nearly $296 million in assets so far and trades in an average volume of 76,000 shares per day. It charges 66 bps in annual fees and gained 0.40% in past 10 days. It currently carries a Zacks ETF Rank #3 with a Medium risk outlook. SPDR S&P Aerospace & Defense ETF (NYSEARCA: XAR ) XAR tracks the S&P Aerospace and Defense Select Industry index, holding a basket of 33 stocks. Northrop Grumman, Lockheed Martin, General Dynamics and Boeing score among the top 10 holdings. This product has attracted an AUM of nearly $166.9 million and exchanges nearly 18,000 shares in hand per day. It charges 35 bps in fees per year and gained 1% in the past 10 days. The fund has a Zacks ETF Rank #3 with a Medium risk outlook . Original post

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

Upbeat Industrial Q1 Results Fail To Lift ETFs

Most of the industrial bellwethers have beaten on earnings in the first quarter of 2016. However, it’s not surprising given the low estimates, which had fallen ahead of this reporting cycle. Among other factors, a recent pullback in the greenback and encouraging manufacturing trends could have played a role in the beat. A strong dollar impacts most industrial bigwigs adversely as most of these companies have significant international exposure. However, the earnings beat came largely on the back of lowered expectations (read: ETFs to Watch on U.S. Manufacturing Revival ). Meanwhile, revenue weakness in the sector remains thanks to reduced spending, volatility in oil prices and lackluster global growth. Below we have highlighted in greater detail earnings of some of the major industrial companies which really drive this sector’s outlook. Industrial Earnings in Focus General Electric Company (NYSE: GE ) Diversified industrial conglomerate General Electric posted mixed first quarter results as it reported in line earnings but missed on revenues. The company’s earnings came in at 21 cents per share, in line with the Zacks Consensus Estimate but up 5% from the year-ago quarter. Shares of the company fell slightly after the earnings release. Revenues were up 6% to $27.8 billion, missing the Zacks Consensus Estimate of $29 billion. The revenue miss was due to a weak global economy and an oil price slide that hurt the renewable and oil and gas segments. For 2016, the company reaffirmed its earnings per share guidance of $1.45-$1.55 (read: Industrial ETFs in Focus on Mixed GE Q1 Performance ). 3M Company (NYSE: MMM ) Another major conglomerate, 3M Company reported earnings of $2.05 per share in first-quarter 2016, beating the Zacks Consensus Estimate of $1.92. Net sales during the quarter were $7.4 billion, down 2.2% year over year but ahead of the Zacks Consensus Estimate of $7.3 billion. The year-over-year decrease in sales was largely due to a significantly negative foreign currency translation impact. 3M shares fell on the day of its earnings release. Honeywell International Inc. (NYSE: HON ) Honeywell International’s earnings per share of $1.53 in the reported quarter beat the Zacks Consensus Estimate of $1.50. Revenues in first-quarter 2016 were up 3% year over year to $9.5 billion, ahead the Zacks Consensus Estimate $9.4 billion. Based on favorable business conditions, Honeywell narrowed its 2016 guidance. The company anticipates earnings in the range of $6.55 to $6.70 per share on revenues of $40.3 billion and $40.9 billion. Shares of the company rose slightly on the day of its earnings release. Union Pacific Corporation (NYSE: UNP ) The rail transportation operator, Union Pacific reported first-quarter 2016 earnings of $1.16 per share, which beat the Zacks Consensus Estimate of $1.09. Earnings declined 11% on a year-over-year basis. Revenues decreased 14% year over year to $4.8 billion in the first quarter, falling short of the Zacks Consensus Estimate of $4.9 billion. A 14% decline in freight revenues hurt the top line. Declining coal shipments weighed on the railroad operator’s results yet again. The stock gained after reporting results. ETF Impact Despite reporting encouraging earnings, most of the industrial stocks failed to hold up gains over the past 10 days, sending the related ETFs into rocky territory. This has put the spotlight on industrial ETFs. Below we discuss four of these ETFs having a sizeable exposure to the above stocks. Industrial Select Sector SPDR Fund (NYSEARCA: XLI ) This product tracks the Industrial Select Sector Index. General Electric occupies the top spot with 11.2% allocation, while 3M, Honeywell and Union Pacific have a combined exposure of roughly 14.7% in the fund. XLI has garnered $7.2 billion in assets and trades in a heavy volume of 13.2 million shares per day. It has a low expense ratio of 0.14%. The fund has the highest exposure to Aerospace & Defense (26%), followed by Industrial Conglomerates (21%). The product gained 0.3% in the past 10 days and currently has a Zacks ETF Rank #4 or ‘Sell’ rating with a Medium risk outlook. Vanguard Industrials ETF (NYSEARCA: VIS ) This fund follows the MSCI US IMI Industrials 25/50 index and holds about 342 securities in its basket. Of these firms, GE occupies the top position with 12.7% share, while 3M, Honeywell and Union Pacific together comprise almost 10.7% of the fund’s assets. The fund manages nearly $2.1 billion in its asset base and charges only 10 bps in annual fees. From an industry perspective, the fund has the highest exposure to Aerospace & Defense (21.7%), followed by Industrial Conglomerates (20.6%). Volume is moderate as it exchanges roughly 112,000 shares a day on average. The product lost 0.1% in the past 10 days and currently has a Zacks ETF Rank #3 or ‘Hold’ rating with a Medium risk outlook. iShares U.S. Industrials ETF (NYSEARCA: IYJ ) IYJ tracks the Dow Jones U.S. Industrials Index to provide exposure to 214 U.S. companies that produce goods used in construction and manufacturing. General Electric occupies the top spot in the fund with almost 11% share while 3M, Honeywell and Union Pacific have a combined exposure of more than 10%. The ETF manages an asset base of $737.6 million and trades in an average volume of 75,000 shares. The fund has top exposure to Capital Goods (58.9%) and Software & Services (12.7%) and Transportation (11.7%) have double-digit exposure each. The fund is slightly expensive with 45 basis points as fees. It rose almost 0.4% in the last 10 days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. Fidelity MSCI Industrials Index ETF (NYSEARCA: FIDU ) This fund tracks the MSCI USA IMI Industrials Index, holding 342 stocks in its basket. General Electric takes the top spot at 12.7% share while 3M, Honeywell and Union Pacific have a combined exposure of almost 11.5%. The product has amassed $161.2 million in its asset base while it trades in moderate volume of nearly 115,000 shares a day on average. The fund has top exposure to Aerospace & Defense (23.4%) and Industrial Conglomerates (20.9%). It is one of the low cost choices in the space charging 12 bps in annual fees from investors. The fund gained 0.5 % in the last 10 days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. Link to the original post on Zacks.com