Earnings Prop Up Health Care

By Ronald Delegge

August 31, 2015 at 08:00 PM

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Behind the sizzling performance of health care stocks is sizzling earnings growth.

The health care sector has seen the largest percentage of companies report actual Q2 2015 EPS above estimates (94%) and actual sales above estimates (69%) among the 10 S&P industry sectors, according to FactSet.

Through the Aug. 7 market close, the Sector SPDR Healthcare ETF (XLV) continued its outperformance of the broader U.S. stock market with a 10.84% year-to-date gain compared to just a 2.12% gain for the S&P 500.

XLV holds a basket of 58 health care stocks within the S&P 500 including blue chips like Johnson & Johnson, Amgen, and Pfizer. The fund has $15.87 billion in assets and charges annual expenses of 0.15%.

Two other companies owned by XLV that have been significant contributors to earnings growth are Allergan PLC and Gilead Sciences. Excluding these two companies from the healthcare group would cut the blended earnings growth rate from 15.4% to just 10.6%.

Sub-industry sectors of health care like biotechnology and health care technology are also experiencing double digit earnings growth.

Biotech focused funds like the iShares Nasdaq Biotechnology ETF (IBB) and SPDR S&P Biotechnology ETF (XBI) have climbed more than 85% since 2013.

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