How Will Biotech ETFs React to Q2 Earnings Release?

By Zacks Investment ResearchStock MarketsAug 10, 2020 04:42AM ET

www.investing.com/analysis/how-will-biotech-etfs-react-to-q2-earnings-release-200533588

How Will Biotech ETFs React to Q2 Earnings Release?

By Zacks Investment Research | Aug 10, 2020 04:42AM ET

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The race to introduce a vaccine or treatment for coronavirus is opening up opportunities, making the biotech sector a prospective space for investments. From vaccine-related positive news to progress in the development of cell therapies for addressing coronavirus, all kept the sector surging.

Favorable updates on two vaccine candidates being made by Moderna (NASDAQ:MRNA) and Pfizer (NYSE:PFE) in collaboration with German biotech firm BioNTech came to the fore. These companies began the late-stage study on their coronavirus vaccines. Other vaccine developers that are being supported by the Operation Warp Speed are also nearing late-stage trials. This includes an experimental vaccine being developed in collaboration with the University of Oxford and AstraZeneca (NYSE:AZN), a vaccine candidate from Johnson & Johnson (NYSE:JNJ) and another one from the biotechnology company Novavax (NASDAQ:NVAX), per The Washington Post article.

Let’s take a look at some big biotechnological earnings releases to see if these will impact ETFs exposed to the space.

Earnings in Focus

On Jul 28, Amgen AMGN reported second-quarter 2020 earnings of $4.25 per share, which surpassed the Zacks Consensus Estimate of $3.81. Earnings increased 7% year over year, largely on the back of higher revenues. Total revenues of $6.21 billion in the quarter outpaced the Zacks Consensus Estimate of $6.18 billion. Moreover, total revenues increased 6% year over year.

Amgen re-affirmed its sales guidance for 2020 while raising its earnings range. It reiterated the revenue guidance at $25.0-$25.6 billion. Adjusted earnings per share guidance was raised from a range of $14.85-$15.60 to $15.10 to $15.75 per share. However, shares have declined 5.7% since the earnings release (as of Aug 10, 2020).

On Jul 30, Gilead Sciences (NASDAQ:GILD) GILD reported disappointing results for the second quarter, as earnings and sales lagged estimates. The company reported earnings of $1.11 per share in the June-end quarter, down from $1.72 in the year-ago quarter and lagging the Zacks Consensus Estimate of $1.46. Total revenues of $5.14 billion lagged the Zacks Consensus Estimate of $5.30 billion and fell from $5.69 billion in the year-ago period.

Gilead has revised its annual guidance. Product sales are now projected around $23-$25 billion versus $21.8-$22.2 billion stated previously. Earnings per share are projected around $6.25-$7.65 in comparison with the previous $6.05-$6.45. Notably, the stock has lost 4.1% since its earnings release (as of Aug 10).

On Jul 22, Biogen BIIB reported second-quarter 2020 earnings per share of $10.26, which surpassed the Zacks Consensus Estimate of $7.99. Earnings increased 12% year over year on higher revenues. Sales of this neuroscience-focused biotech came in at $3.68 billion, up 2% from the year-ago quarter. Sales also surpassed the Zacks Consensus Estimate of $3.43 billion. Sales growth was primarily led by higher sales of its multiple sclerosis drug Tecfidera and one-time licensing revenues in the quarter offset lower sales of Tysabri and spinal muscular atrophy drug, Spinraza as well as biosimilar products. Moreover, total revenues increased 4% on a sequential basis. The stock has risen around 9.1% since the earnings release (as of Aug 10).

On Jul 30, Alexion Pharmaceuticals (NASDAQ:ALXN) ALXN posted second-quarter adjusted earnings of $3.11 per share, which rose from the year-ago quarter’s $2.64. Earnings also outpaced the Zacks Consensus Estimate of $2.55. Revenues were up 20.1% year over year to $1.44 billion and outpaced the Zacks Consensus Estimate of $1.27 billion on higher sales of Ultomiris, Strensiq and Kanuma.

Alexion updated the guidance. It raised the total revenues and adjusted earnings per share guidance and slashed the operating margin outlook. The stock has lost 1.3% since the earnings release (as of Aug 10).

Biotech ETFs in Focus

In the current scenario, we believe it is prudent to discuss a few ETFs which have a relatively wider exposure to the companies discussed.

iShares Nasdaq Biotechnology ETF IBB

This fund seeks to provide exposure to U.S. biotechnology stocks and tracks the Nasdaq Biotechnology Index. It comprises 207 holdings with the above-mentioned companies taking about 25.1% of the fund. It has AUM of $9.67 billion and charges a fee of 46 basis points a year. The fund carries a Zacks ETF Rank #1 (Strong Buy), with a High-risk outlook (read: Red Hot ETF Areas Amid the Coronavirus Crisis).

VanEck Vectors Biotech ETF BBH

The underlying MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. It holds about 24 securities in its basket, with the concerned companies having 32.4% weight in the fund. Its AUM is $508.4 million and expense ratio is 0.35%. The fund currently carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook (see all Health Care ETFs here).

SPDR S&P Biotech (NYSE:XBI) ETF XBI

The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 133 securities in its basket and puts some weight in-focus companies. Its AUM is $5.97 billion and expense ratio is 0.35%. The fund carries a Zacks ETF Rank #1, with a High-risk outlook (read: Moderna Turns Red Hot: Biotech ETFs to Bet On).

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Biogen Inc. (NASDAQ:BIIB): Free Stock Analysis Report

Alexion Pharmaceuticals, Inc. (ALXN): Free Stock Analysis Report

Gilead Sciences, Inc. (GILD): Free Stock Analysis Report

Amgen Inc. (NASDAQ:AMGN): Free Stock Analysis Report

iShares Nasdaq Biotechnology ETF (IBB): ETF Research Reports

SPDR SP Biotech ETF (XBI): ETF Research Reports

VanEck Vectors Biotech ETF (BBH): ETF Research Reports

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How Will Biotech ETFs React to Q2 Earnings Release?

Earnings in Focus

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