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Insurance ETFs Shining Despite Dull Q3 Earnings

The Q3 earnings season hasn’t been all that encouraging for the financial sector as total earnings for 89.1% of the sector’s total market capitalization are up only 1.7% on 2.3% revenue decline. This is worse than Q2 and the four-quarter average earnings growth of 8.1% and 6.2%, respectively, on 0.8% and 1.3% revenue growth (read: Guide to the 7 Most Popular Financial ETFs ). Earnings surprises were also unimpressive with 53.7% of the companies beating earnings estimates and 42.7% of them beating on top lines. In particular, earnings from the insurance industry have been weaker with most players failing to beat or meet either our earnings or revenue estimates. MetLife (NYSE: MET ), Prudential Financial (NYSE: PRU ) and American International (NYSE: AIG ) missed our estimate on the earnings front while Chubb Corp (NYSE: CB ) an Aflac Inc. (NYSE: AFL ) lagged revenues. However, Travelers (NYSE: TRV ) and Allstate (NYSE: ALL ) surpassed our estimates on both the top and bottom lines. Insurance Earnings in Focus Earnings at one of the leading property and casualty insurer – Chubb – strongly outpaced our estimate by 20.30% and improved 9% from the year-ago quarter. However, revenues of $3.47 billion missed the Zacks Consensus Estimate of $3.51 billion. Another property and casualty insurer and an industry bellwether, Allstate , topped the Zacks Consensus Estimate by 20 cents with earnings of $1.52, which improved 9.3% from the year-ago quarter. Revenues rose 1% year over year to $9.03 billion and edged past the Zacks Consensus Estimate of $7.98 billion (see: all the Financial ETFs here ). Aflac , the seller of supplement health insurance, posted earnings per share of $1.56, beating our estimate by eight cents and improving 3.3% year over year. However, revenues declined 12.1% year over year to $5.00 billion and fell shy of our estimate of $5.11 billion. Earnings of $2.93 at personal property and casualty insurer, Travelers trumped the Zacks Consensus Estimate by 72 cents and improved 12.3% from the year-ago earnings. Revenues slid 1.3% year over year to $6.67 billion but surpassed our estimate of $6.63 billion. However, MetLife , the U.S. life insurer behemoth, reported disappointing earnings of 62 cents per share, lagging the Zacks Consensus Estimate of $1.47 and declining 62% from the year-ago earnings. However, revenues rose 0.3% year over year to $17.97 billion and were well ahead of our estimate of $17.47 billion. On the other hand, PRU , the second-largest U.S. life insurer, also missed our earnings estimate by three cents improved 9.1% year over year. Revenues declined 5.6% year over year to $11.1 billion but were on par with our estimate. The largest commercial insurer in the U.S. and Canada, AIG dampened investor’s mood with a huge earnings miss of 49.5% and year-over year decline of 56%. However, revenues of $13.16 billion came above our estimate of $13.06 billion. ETFs in Focus Despite unsatisfactory earnings, insurance ETFs have moved up from a one-month look buoyed up by speculations of an interest rate hike. This is because the sector is a clear beneficiary of a rising interest rate environment. Investors looking to gain exposure to this corner of the market segment in a diversified way may consider the following ETFs. SPDR S&P Insurance ETF (NYSEARCA: KIE ) This fund follows the S&P Insurance Select Industry Index and offers an equal weight exposure to 51 stocks, suggesting no concentration risk. None of the securities holds more than 2.28% of total assets. More than one-third of the portfolio is allocated to the property and casualty insurance sector while life & health insurance accounts for another one-fourth share. The ETF has managed $625 million in its asset base and trades in a moderate average daily volume of over 107,000 shares. The product has an expense ratio of 0.35% and gained nearly 4.6 over the past one month. It has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. iShares U.S. Insurance ETF (NYSEARCA: IAK ) With AUM of $130.9 million, this product tracks the Dow Jones U.S. Select Insurance Index and charges 43 bps in annual fees. Volume is light, trading in roughly 29,000 shares per day. In total, the fund holds 63 securities in its basket with the largest allocation going to American International at 13.6%, closely followed by Metlife at 9.5%. Other firms hold less than 6.5% of assets. For an industry look, property & casualty insurance accounts for 42.2% share while life & health insurance and multiline insurance round off the top three with double-digit exposure each. IAK is up 6.5% from a one-month look and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook. PowerShares KBW Insurance Portfolio ETF (NYSEARCA: KBWI ) This fund tracks the KBW Nasdaq Insurance Index and holds 23 securities in its basket. Each firm holds less than 9% share each with TRV, PRU and MET occupying the top three spots. While insurance makes up for 95% of the portfolio, consumer finance and banks take the remainder. The product has amassed about $14.4 million in AUM while volume is paltry at about 1,400 shares. The ETF charges an annual fee of 35 bps and added 6.5% in the trailing one-month period. It has a Zacks ETF Rank of 3 with a High risk outlook. Link to the original post on Zacks.com

Pharma ETFs To Buy On String Of Q3 Earnings Beats

Like in the past few quarters, the healthcare sector continued to impress with its earnings in Q3. This is especially true as total earnings for 78.8% of the sector’s total market capitalization are up 12.5% on revenue growth of 8.4%, with earnings and revenue beat ratios of 83.3% and 61.1%, respectively. In fact, the sector is leading the way higher in terms of beating revenue estimates, where the overall growth picture of the S&P 500 is lagging. Among the most notable players, Johnson & Johnson (NYSE: JNJ ) was the first major drug company to report earnings on October 13, followed by Eli Lilly and Company (NYSE: LL ) on October 22. The other three major U.S. drug companies – Pfizer (NYSE: PFE ), Merck (NYSE: MRK ) and Bristol-Myers Squibb Company (NYSE: BMY ) – reported on October 27. All these industry primes outpaced our earnings estimates as well as raised their full-year outlook, while some missed on the revenue front. Johnson & Johnson’s Earnings in Focus The world’s biggest maker of healthcare products continued its long streak of earnings beats despite currency headwinds, which were responsible for the revenues missing our estimates. Earnings per share came in at $1.49, a nickel above the Zacks Consensus Estimate, but 7.4% lower than the year-ago earnings. Revenues slid 7.4% year over year to $17.1 billion and fell shy of the Zacks Consensus Estimate of $17.4 billion. In spite of the fact that a strong U.S. dollar would remain a major drag on international revenue growth, the company raised the lower end of the earnings per share guidance range to $6.15-6.20 from $6.10-6.20. The new midpoint is above the Zacks Consensus Estimate of $6.16 at the time of revising the guidance, reflecting confidence in its future growth. JNJ has gained 6.4% to-date since its earnings announcement. Pfizer’s Earnings in Focus The U.S. drug giant topped the Zacks Consensus Estimate for the top and the bottom lines, and raised its guidance for the fiscal 2015. Earnings per share of 60 cents and revenues of $12.01 billion were ahead of our estimates by a nine cents and $0.65 billion, respectively. Notably, earnings per share rose 5%, while revenues slid 2% year over year. Based on the earnings beat, Pfizer raised its revenue and earnings outlook for fiscal 2015. The company now expects earnings per share of $2.16-2.20 and revenues of $47.5-48.5 billion, compared to the previous outlook of $2.04-2.10 and $46.5-47.5 billion, respectively. The Zacks Consensus Estimate was $2.09 for earnings and $47.7 billion for revenues at the time of revising the guidance. Shares of PFE have moved up 2.6% since the earnings announcement. Merck’s Earnings in Focus Merck’s earnings per share came in at 96 cents, a nickel ahead of the Zacks Consensus Estimate and 6.7% higher than the year-ago earnings. Revenues slipped 4.6% year over year to $10.07 billion, and were slightly below the Zacks Consensus Estimate of $10.09 billion. For fiscal 2015, Merck raised the low end of the revenue guidance to $39.2-39.8 billion from $38.6-39.8 billion, including currency headwinds of $1 billion, and boosted the earnings per share outlook to $3.55-3.60 from $3.45-3.55. The Zacks Consensus Estimate at the time of the earnings release was pegged at $3.50 for earnings and $39.6 billion for revenues. The stock has added about 4.1% to-date post its earnings announcement. Bristol-Myers’ Earnings in Focus Bristol-Myers reported earnings per share of 39 cents, outpacing our estimate by four cents, but declining 13% from the year-ago earnings. Meanwhile, revenues climbed 4% to $4.07 billion and edged past the Zacks Consensus Estimate of $3.85 billion. Like the other drug makers, the company raised its full-year earnings per share guidance range to $1.85-1.90 from $1.70-$1.80, the midpoint of which was lower than our estimate of $1.82 at the time of the earnings announcement. Revenues are expected at $16.0-16.4 billion, which is at the low end of the Zacks Consensus Estimate of $16 billion. Shares of BMY are up 1.8% to-date since the earnings announcement. Eli Lilly’s Earnings in Focus Earnings of 89 cents at Eli Lilly strongly beat the Zacks Consensus Estimate by 13 cents and came in 22% higher than the year-ago earnings. Revenues slid 4% to $4.960 billion, and were marginally below our estimate of $4.962 billion. Eli Lilly also boosted its full-year outlook, with earnings per share revised upward from $3.20-3.30 to $3.40-3.45. Meanwhile, the company maintained its revenue guidance of $19.7-20.0 billion. The Zacks Consensus Estimate at the time of the earnings release was pegged at $3.27 per share for earnings and $19.9 billion for revenues. Shares of LLY have climbed 6.5% since the earnings announcement. ETF Angle The string of earnings beats and raised outlook has driven pharma ETFs higher from a one-month look. This trend is likely to continue for the rest of the year, given that the industry has a robust Zacks Industry Rank in the top 25% at the time of writing. Further, all these funds have a solid Zacks ETF Rank of 1 (Strong Buy) or 2 or (Buy), suggesting their continued outperformance (see all the Healthcare ETFs here ). iShares U.S. Pharmaceuticals ETF (NYSEARCA: IHE ) This ETF provides exposure to 43 pharma stocks by tracking the Dow Jones U.S. Select Pharmaceuticals Index. The five in-focus firms are among the top six holdings, accounting for 42.6% of total assets, suggesting heavy concentration. The product has $891.8 million in AUM and charges 43 bps in fees and expense. Volume is light, as the fund exchanges about 67,000 shares a day. IHE added about 6.9% over the past one month. 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 $1.6 billion, and sees good volume of around 233,000 shares a day. The fund charges 56 bps in fees and expenses from investors. Holding 23 stocks, PJP invests more than one-fourth of its assets in the in-focus five firms. The ETF surged about 8% over the trailing one-month period. Market Vectors Pharmaceutical ETF (NYSEARCA: PPH ) This ETF follows the Market Vectors US Listed Pharmaceutical 25 Index and holds 26 stocks in its basket. JNJ, PFE, MRK, LLY and BMY are among the top 12 holdings that make up for a combined 28.9% share. The product has amassed $338.6 million in its asset base, and trades in a moderate volume of about 72,000 shares a day. The expense ratio came in at 0.35%. The fund was up about 4% over the past one-month period. SPDR S&P Pharmaceuticals ETF (NYSEARCA: XPH ) This fund provides an almost equal-weight exposure to the pharma companies by tracking the S&P Pharmaceuticals Select Industry Index. With AUM of over $719.6 million, it trades in moderate volume of around 72,000 shares a day and charges 35 bps in fees a year. In total, the product holds 43 securities, with the in-focus five firms taking nearly 3% share each. The product has added 7.2% in the same period. Original Post

Semiconductor ETFs Surge On Impressive Q3 Earnings

Semiconductors have dragged down the broader technology sector for the most part of this year. But the recent wave of acquisition talks and a spate of strong earnings reports from some industry players have reversed this trend, pushing the chip stocks higher in recent weeks. In particular, most of the well-known industry players like Micron Technology (NASDAQ: MU ), Texas Instruments (NASDAQ: TXN ), Intel (NASDAQ: INTC ) and Broadcom (NASDAQ: BRCM ) have managed to either beat or meet their Zacks Consensus Estimate on earnings, spreading an air of optimism into his corner of the technology sector. Revenues are also encouraging with all but Micron Technology beating the estimates (read: Time for Semiconductor ETFs? ). Let’s dig into the individual performances: Semiconductor Earnings in Focus Though the earnings results was not encouraging, Micron Technology was the major gainer in the industry as the stock has climbed over 12% to date post earnings announcement on October 1, after the close of the market. The memory chipmaker reported adjusted earnings of 37 cents per share, in line with the Zacks Consensus Estimate while revenues of $3.60 billion were slightly below our estimate of $3.67 billion. The company guided revenues in the range of $3.35-$3.60 billion and earnings per share of 20-26 cents for the ongoing first quarter of fiscal 2016. The Zacks Consensus Estimate at the time of earnings release was pegged at $3.75 billion for revenues and 48 cents for earnings per share. Texas Instruments climbed nearly 9.3% since the earnings announcement on October 21, after the closing bell. The company topped our earnings estimate by nine cents and revenues by $140 million. For the ongoing fiscal fourth quarter, it expects revenues in the range of $3.07-$3.33 billion and earnings per share of 64-74 cents. The midpoint of both is better than the Zacks Consensus Estimate of $3.12 billion and 62 cents, respectively, at the time of issuing the guidance. Shares of Intel , the world’s largest chipmaker, have moved up nearly 5.7% to date post earnings announcement on October 13, after the closing bell. The company continued its winning streak of beating earnings for the seventh consecutive quarter and topped our revenue estimate as well. It posted earnings per share of 64 cents on revenues of $14.47 billion that easily surpassed the Zacks Consensus Estimate of 59 cents and $14.23 billion, respectively. The company expects revenues in the range of $14.3-$15.3 billion for the ongoing fourth quarter, the mid-point of which is approximately in line with our current estimate. The wireless chipmaker BRCM also topped our estimates on both the top and the bottom lines. Earnings per share came in at 77 cents on revenues of $2.19 billion, trumping the Zacks Consensus Estimate by 4 cents and $45 million, respectively. The company didn’t issue any guidance as it is in the process of being acquired by Avago Technologies (NASDAQ: AVGO ) for $37 billion, which is expected to close in the first quarter of calendar 2016. Shares of BRCM are relatively flat since the earnings announcement on October 26, after the market closed (read: Semiconductor ETFs Surge on Avago – Broadcom Deal ). ETFs in Focus Impressive performances of these chipmakers have pushed the semiconductor ETFs higher over the past one month. Investors seeking to ride out the surging space in a diversified way could consider the following ETFs. All these funds have a Zacks ETF Rank of 3 or ‘Hold’ rating. iShares PHLX SOX Semiconductor Sector Index ETF (NASDAQ: SOXX ) This ETF follows the PHLX Semiconductor Sector Index and offers exposure to 30 domestic firms. It is highly concentrated on the top 10 firms with 59.2% share, and INTC and TXN occupy the top two positions. Two-thirds of the portfolio is dominated by large cap stocks while mid caps take the remainder, with just 9% going to small caps. The fund has amassed $425.6 million in its asset base and trades in solid average volume of roughly 590,000 shares a day. The product charges 47 bps in fees a year from investors and has gained nearly 11.2% over the past month. Market Vectors Semiconductor ETF (NYSEARCA: SMH ) This fund provides exposure to 26 securities by tracking the Market Vectors US Listed Semiconductor 25 Index. Of these, three firms – Intel, Taiwan Semiconductor Manufacturing (NYSE: TSM ) and Qualcomm Inc. (NASDAQ: QCOM ) – dominate the fund’s return with a combined 41% of total assets while other firms hold no more than 5.21% share. From a market cap look, the product focuses on large cap stocks, as these account for about 83% of the portfolio. The product has managed assets worth $345.8 million and charges 35 bps in annual fees and expenses. It is heavily traded with volume of around 4 million shares per day and is up 9.4% in the trailing one-month period. SPDR S&P Semiconductor ETF (NYSEARCA: XSD ) This fund tracks the S&P Semiconductor Select Industry Index, holding 48 stocks in its portfolio. It is widely spread across a number of securities as none of these allocates more than 3.92% of the assets. The product has a definite tilt toward small cap stocks at 65% while the rest is evenly split between the other two market cap levels. The fund is less popular with AUM of $144.6 million and average daily volume of more than 156,000 shares. It charges 35 bps in fees per year and surged 14% in the same period. PowerShares Dynamic Semiconductors Portfolio ETF (NYSEARCA: PSI ) This fund tracks the Dynamic Semiconductor Intellidex Index, holding 30 securities in the basket with none holding more than 5.68% of assets. Here again, the ETF is skewed toward small caps at 49% while large caps and mid caps account for 39% and 13%, respectively. The product, with AUM of $61.1 million is often overlooked by investors and hence sees a lower average daily volume of 31,000 shares. Expense ratio came in at 0.63%. PSI added 8.7% in the same time period. Link to the original post on Zacks.com