JNJ Touches New Highs Post Solid Q4 Earnings: ETFs in Focus

Sweta Killa
·5-min read

Johnson & Johnson JNJ set the ball rolling for pharma and medical device manufacturer fourth-quarter 2021 earnings on Jan 26, before the opening bell. The world's biggest healthcare products maker continued its long streak of earnings beat and outpaced revenue estimates. Further, the company offered upbeat full-year outlook.

Earnings per share came in at $1.86, beating the Zacks Consensus Estimate of $1.81 and declining 1.1% from the year-ago quarter. Revenues grew 8.3% year over year to $22.5 billion and edged past the Zacks Consensus Estimate of $21.6 billion. The stronger performance was driven by strong sales for blockbuster immunology and cancer drugs, as well as consumer-health products such as Tylenol and Listerine.

For 2021, Johnson & Johnson expects revenues in the range of $90.5-$91.7 billion, indicating year-over-year increase of 9.5%-11%, and earnings per share guidance of $9.40-$9.60, up 17.1-19.6% year over year. The Zacks Consensus Estimate is pegged at $88.7 billion for revenues and $8.89 for earnings per share.

Additionally, the company expects the phase 3 COVID-19 vaccine data, which will be released early next week, to be robust, matching expectations that it will rival the efficacy offered by the Moderna MRNA and Pfizer PFE vaccines. JNJ vaccine is a big deal as it requires just one dose and can be stored at room temperature unlike its rivals (read: Can Moderna ETFs Gain on COVID Vaccine Update Against Variants?).

The solid results coupled with upbeat vaccine data optimism pushed JNJ shares to all-time high. Currently, the stock has a Zacks Rank #3 (Hold) and VGM Score of B.

ETFs in Focus

Given this, investors should closely watch the movement of the stock and ETFs having a largest allocation to this diversified drug maker. Below we have highlighted them (see: all the Healthcare ETFs here).

iShares U.S. Pharmaceuticals ETF IHE

This ETF provides exposure to 43 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 23% share. The product has $366.8 million in AUM and charges 42 bps in fees and expenses. Volume is lower as it exchanges about 14,000 shares a day. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Health Care Select Sector SPDR Fund XLV

The most-popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $26.4 billion in its asset base and trades in heavy volume of around 7.6 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 63 securities in its basket, with JNJ taking the top spot, accounting for 10.1% of the assets. Pharma accounts for 29.3% share from a sector look, while healthcare equipment and supplies, healthcare providers and services, and biotech have a double-digit exposure each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 4 Sector ETFs & Stocks to Bet on Q4 Earnings).

iShares Evolved U.S. Innovative Healthcare ETF IEIH

This actively managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 252 stocks in its basket, JNJ is the top firm with a 9.5% allocation. The product has accumulated $34.1 million in its asset base and trades in a meager volume of 12,000 shares per day on average. It charges 18 bps in annual fees.

iShares U.S. Healthcare ETF IYH

This fund offers exposure to 123 securities by tracking the Dow Jones U.S. Health Care Index. Here again, Johnson & Johnson dominates the fund’s returns with 8.8% of the total assets. In terms of industrial exposure, pharma takes the top spot at 26.8%, followed by healthcare equipment (24.3%) and biotech (17.6%). The product has amassed nearly $2.6 billion in its asset base and charges 43 bps in annual fees. It trades in a good volume of around 35,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook.

Vanguard Health Care ETF VHT

This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 452 stocks in its basket. Of these, Johnson & Johnson occupies the top position with a 7.8% allocation. Pharma takes the largest share at 25%, while healthcare equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $14 billion and an average daily volume of about 245,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

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Johnson & Johnson (JNJ) : Free Stock Analysis Report

Pfizer Inc. (PFE) : Free Stock Analysis Report

Moderna, Inc. (MRNA) : Free Stock Analysis Report

Health Care Select Sector SPDR ETF (XLV): ETF Research Reports

Vanguard Health Care ETF (VHT): ETF Research Reports

iShares U.S. Healthcare ETF (IYH): ETF Research Reports

iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports

iShares Evolved U.S. Innovative Healthcare ETF (IEIH): ETF Research Reports

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