Healthcare ETFs Hold Their Ground As Stocks Selloff On Poor Data

While stocks struggled anew on Wednesday, relinquishing most of the gains of the prior day, amid poor data and renewed coronavirus concerns, the healthcare sector had some shining stars.

Shares of Johnson and Johnson stock jumped higher on Tuesday after the healthcare company beat Wall Street’s first-quarter estimates, despite the fact that the medical behemoth revised its full-year outlook.

Q1 featured strong pharmaceutical and consumer health sales for JNJ, but revenue from medical devices plummeted as patients procrastinated on necessary procedures amid panic related to the coronavirus COVID-19 pandemic.

“We would be curious to hear whether (company guidance) assumes continued strength/growth in pharma and consumer for 2020,” Evercore ISI analyst Vijay Kumar said in a report to clients. “If so, it would imply a significant deceleration in MedTech for the rest of the year.”

For the first quarter, Johnson & Johnson made $2.30 a share, minus some items, on $20.7 billion in sales. On a year-over-year basis, earnings climbed a healthy 9.5% excluding the impact of exchange rates, as sales rallied 3.3%, easily beating the average estimate of analysts polled by Zacks Investment Research for Johnson & Johnson earnings of $2.08 per share on $19.66 billion.

“Johnson & Johnson is built for times like this, and we are leveraging our scientific expertise, operational scale and financial strength in the effort to advance the work on our lead COVID-19 vaccine candidate,” Chief Executive Alex Gorsky said in a written statement.

United Health Care was another winner on Wednesday, rallying 4.13% after the company released earnings. First-quarter 2020 net earnings were $3.52 per share and adjusted net earnings were $3.72 per share, suggesting that there was very little impact on the company from the progression of the COVID-19 virus across the U.S. given various factors that only emerged late in the quarter,

“From the outset of the COVID-19 pandemic, our singular priority has remained clear: the health, safety, and support of the people and communities we serve, including our dedicated team of 325,000 people and the heroic members of the health care workforce, and the reliability and sustainability of health care delivery systems,” said David S. Wichmann, chief executive officer of UnitedHealth Group.

Healthcare ETFs that contained the stocks were relatively robust in comparison to the benchmark indexes, which finished down 1.5-2% across the board.

In contrast, the Health Care Select Sector SPDR Fund (XLV) was down only 0.51% and includes JNJ, UNH, and PFE. The iShares U.S. Healthcare ETF (IYH), which also shares those holdings was down 0.46%. The Vanguard Health Care Index Fund ETF Shares (VHT) was down 0.81%.