Healthcare ETFs weakened Wednesday after Abbot Laboratories (NYSE: ABT) slipped on a revenue miss and revealed an uninspiring forecast for the first quarter of the new year.
The Health Care Select Sector SPDR ETF (NYSEArca: XLV) fell 0.3% on Wednesday while the S&P 500 was 0.1% lower.
Abbot Laboratories’ quarterly revenue fell short of expectations due to lower sales of generic drugs in the emerging markets, Reuters reports.
ABT shares declined 2.3% Wednesday after the announcement. ETFs with heavier tilts toward ABT were also dragged down by the report, with the iShares US Medical Devices ETF (NYSEArca: IHI) down 0.5% and First Trust Nasdaq Pharmaceuticals ETF (NasdaqGM: FTXH) 0.6% lower.
Furthermore, the healthcare company projected current-quarter earnings below analysts’ estimates. Some anticipated the stronger U.S. dollar to hurt profits as a large portion of their revenue comes from overseas sources.
“Some may look at these results and guidance as nothing too special, especially since Abbott had a lower tax rate than what we were anticipating, which helped this quarter’s results,” Edward Jones analyst John Boylan said.
Abbot also stated it will not focus on mergers and acquisitions in the near future, Reuters reports.
“I just don’t see M&A right now as a high priority…. You make a much higher return on your organic growth,” Chief Executive Officer Miles White said on a conference call, adding that he did not see gaps right now that could be filled by M&A.
The unenthusiastic M&A outlook in the biotechnology and pharmaceutical may have also put pressure on biotech names, with the SPDR S&P Biotech ETF (NYSEArca: XBI) down 1.7% and the iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB) 1.1% lower Wednesday.
Further weighing on the healthcare segment, Pfizer (NYSE: PFE) and Merck (NYSE: MRK) retreated after Wall Street downgraded the companies on increased competition and pending patent cliff, CNBC reports.
“Xeljanz, Ibrance, Xtandi, Eliquis and Tafamidis totaling $20 billion of sales (about 30 percent of total revenue in 2015) all lose patent protection from 2025 to 2029 and our valuation blend of discounted cash flow and price per earnings does not ignore this dynamic,” UBS’ pharmaceuticals analyst Navin Jacob said in a note.
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