Eli Lilly tops S&P 500 healthcare sector in Q1 as weight loss frenzy continues

The Health Care Select Sector SPDR Fund ETF (NYSEARCA:XLV), tracking the healthcare companies under S&P 500, rose 8.32% in the first quarter of 2024, lagging slightly behind the broader S&P 500 index which rose 10.16%.

Eli Lilly (LLY) saw the biggest growth in the S&P 500 healthcare index, rising nearly 34% thanks to continued buzz around its weight loss drugs. Sales of its weight loss medicines rose well past analyst estimates in its latest Q4 results.

DaVita (DVA) came in a close second rising nearly 33%.

The overall sector saw mixed movement in January but has risen steadily since the end of January amid earnings and news related to obesity drugs and marijuana banking reform.

Industries Q1 performance

The Health Care Equipment & Services sector rose 5.96% in the first three months of the year, while the Pharmaceuticals, Biotechnology and Life Sciences sector gained about 10.23%.

The healthcare-focused ETF had a net outflow of $527.2M in the quarter.

Top 5 S&P 500 healthcare performers in Q1:

• Lilly (LLY) +33.78%
• DaVita (DVA) +32.79%
• Edwards Lifesciences (EW) +25.39%
• Catalent (CTLT) +24.07%
• HCA Healthcare +22.97%

Bottom 5 S&P 500 healthcare performers in Q1:

• Humana (HUM) -23.19%
• Insulet (PODD) -22.59%
• Walgreens Boots Alliance (WBA) -18.58%
• Biogen (BIIB) -17.68%
• Zoetis (ZTS) -14.06%

What Analysts Expect

SA Analyst Robert Wilson suggests, “Health Care Select Sector SPDR Fund ETF warrants a buy rating due to its strong mix of holdings and track record of long-term performance. Additionally, the fund has the lowest expense ratio and highest dividend yield compared to three leading peer health care funds.”

Speaking about the top gainer of the index, Wilson suggests, “Eli Lilly's success appears to be already priced in with a 128.10 P/E GAAP. This puts LLY’s P/E at 294% above its sector’s median."

On the other hand, The Sunday Investor said, "I don't support overweighting the Health Care sector with XLV. Growth prospects are relatively poor except for Eli Lilly, and its forward P/E is unattractive."

Seeking Alpha analysts recommend a Buy for the sector.

What Quantitative Measures Say

XLV has a Hold rating from Seeking Alpha’s Quant Rating system with a 3.06 score out of 5. This comes largely from an A+ in liquidity and dividends, countered by a B- in Momentum and a C+ in Risk.