Healthcare stocks enter a crucial week as three industry heavyweights—Johnson & Johnson (JNJ), UnitedHealth Group (UNH), and Abbott Laboratories (ABT)—prepare to report earnings. The sector has been under pressure after a forecasted 9% decline in second-quarter profits, but analysts caution that the headline number may be misleading.
According to FactSet Research Systems (FDS), S&P 500 healthcare earnings per share are expected to fall 9.0% year over year. However, excluding Gilead Sciences (GILD), the sector is actually on track for 7.1% growth—a swing of more than 16 percentage points. Gilead's 2026 forecast includes $11.5 billion in in-process R&D expenses on acquired drugs, along with financing costs, which skew the overall figure.
The real test comes this week: J&J reports Wednesday, July 15, followed by UnitedHealth and Abbott on Thursday, July 16. Together, these three companies account for 20.1% of the Health Care Select Sector SPDR Fund (XLV), making their results a critical barometer for the broader healthcare sector.
Market Context and Investor Focus
Healthcare stocks have been sliding, with XLV dropping 1.8% in the short week through July 10, while the S&P 500 rose 1.2%. That nearly 3-percentage-point gap could attract buyers if earnings hold up, but investors are watching closely to see if weak profits are isolated or spreading through the group.
Timing is key: June CPI is due Tuesday, July 14, at 8:30 a.m. ET, with PPI on Wednesday and June retail sales on Thursday, both also at 8:30 a.m. J&J’s earnings call kicks off in step with Wednesday’s PPI report, while UnitedHealth reports half an hour before retail sales on Thursday, and Abbott’s call follows half an hour after. If inflation runs hot, bond yields could rise, potentially pressuring future biotech profits and increasing costs for insurers and providers.
What to Watch at Each Company
Johnson & Johnson is up first, giving investors an early look at both its pharmaceutical and medical device segments. Beyond an earnings beat, traders should focus on sales trends, margin dynamics, and forward guidance. If the beat is driven by tax benefits, currency moves, or other nonrecurring items, it won’t provide much insight into the underlying health of the drug and device sectors.
UnitedHealth Group is likely to draw the strongest market reaction. The company’s medical cost ratio—the percentage of premiums spent on medical care—will signal whether higher prices are covering rising utilization. The Kaiser Family Foundation reported that Affordable Care Act insurers are requesting a median 14% premium increase for 2027, the second-largest since 2018, citing higher hospital costs, more patient visits, and rising specialty drug expenses. Since premiums are set before coverage begins while claims continue to flow, any spike in costs could hit UnitedHealth first, before higher pricing takes effect. This also has implications for Humana (HUM) and Elevance Health (ELV).
Abbott Laboratories offers another data point on patient demand and manufacturing costs. Comparing its device and diagnostics results with J&J’s medtech numbers will help investors distinguish company-specific trends from sector-wide moves. If both report higher sales and stable margins, it strengthens the argument that healthcare’s earnings drag is a one-off accounting hit.
Broader Sector Outlook
Excluding Gilead, FactSet sees 8% earnings growth this year for pharmaceuticals and healthcare providers and services, and 6% for equipment and supplies. Five of six healthcare industries are expected to post earnings gains, with only biotech declining by 79%.
Consistency is the line in the sand. If two out of the three major players report around 5% to 9% growth and margins hold up, last week’s 3% gap in XLV versus the S&P 500 will likely prove overdone. But if insurance expenses continue rising and drug or device margins slip, the 9% headline should not be dismissed as a one-off—it could be an early sign that a broader slowdown is taking hold.
Risks to Watch
Beyond the accounting distortions from Gilead, real operating risks remain. A jump in UnitedHealth’s medical cost ratio, softer margins at J&J or Abbott, drug-trial failures, regulatory setbacks, or any stronger-than-expected inflation print could hold the sector back, even if headline earnings look better on an adjusted basis.
