Priceline profit higher as bookings jump

Priceline profit higher as bookings jump

Stock Market Predictions

NEW YORK (Global Markets) - Online travel agency on Thursday posted a higher quarterly profit that topped analysts' expectations as strong growth at its overseas markets boosted bookings.

Priceline also forecast third-quarter profit above Wall Street expectations and its shares jumped 10 percent in after-hours trading to $532.56.

"People plan their summer travel in advance and they are taking their trips now even if they are somewhat concerned about the economy," Priceline Chief Executive Jeffery Boyd told Global Markets in an interview.

Boyd said he was seeing a slowdown in the rate of increase in hotel rates and airfare in the United States.

"Pricing is not as firm as it was a few months ago though it is still up year over year," said Boyd.

Last month, rival Expedia Inc posted a higher second-quarter profit as bookings increased by 19 percent. The company noted strong growth in hotel bookings.

Priceline's second-quarter earnings were $256.4 million, or $5.02 a share -- up from $115.0 million, or $2.26 a share, a year earlier.

Excluding some items, profit was $5.49 a share, above analysts' view of $4.91, according to Thomson Global Markets I/B/E/S.

Revenue rose 44 percent to $1.1 billion, mostly in line with expectations of $1.08 billion.

Bookings at Priceline, which runs, and TravelJigsaw in addition to its namesake website, jumped 70 percent to $5.8 billion.

The company forecast third-quarter profit, excluding some items, of $9.10 to $9.30 a share and revenue growth of 37 to 42 percent.

It expects total travel bookings to grow 47 to 52 percent. This is slower than the 70 percent growth seen in the second quarter.

CEO Boyd said the moderating growth was due to tough comparisons with year-ago figures.

He also said as the business gets bigger, growth would slow over time.

Earlier on Thursday, JP Morgan assumed coverage of Priceline with an "overweight" rating and a $610 price target citing strength in the company's international business.

Priceline shares closed at $483.34 Thursday on Nasdaq.

The brokerage said there is still room for strong growth in Europe and a significant opportunity in South America and Asia.

(Reporting by A. Ananthalakshmi; Editing by Gary Hill)

CVS Caremark cuts sales view, shares fall

CVS Caremark cuts sales view, shares fall

Stock Market Predictions

CHICAGO (Global Markets) - CVS Caremark Corp (CVS.N) trimmed its 2011 sales forecast and narrowed its profit target, sending its shares down more than 3 percent on Thursday even though it posted a better-than-expected quarterly profit.

While the company's pharmacy benefits management business is showing signs of improvement after some trouble in recent years, CVS is still feeling the impact of a weak economy.

Shoppers are opting to buy less expensive goods, including generic drugs. CVS said visits to its stores in the second quarter were flat versus a year earlier.

"If I think about the outlook for the remainder of the year, I personally don't see the economy changing dramatically," Chief Financial Officer Dave Denton said in an interview. "I think the consumer is going to remain cautious."

CVS, like other drugstores and pharmacy benefits managers, is selling more generic drugs. That move crimps revenue because generic drugs are less expensive than their branded counterparts. However, generics are more profitable.

Denton declined to say how much of a lift generics provide, although he called it substantial.

CVS now sees 2011 revenue up 10.5 percent to 11.5 percent, down from a prior forecast of 11 percent to 13 percent.

CVS hopes to benefit from uncertainty as two rival PBMs, Express Scripts Inc (ESRX.O) and Medco Health Solutions Inc (MHS.N), work on a merger and Express Scripts deals with the potential loss of its business with Walgreen Co (WAG.N).

Two large pharmacy groups said on Thursday they sent a letter to U.S. Federal Trade Commission opposing Express Scripts' plan to buy Medco. CVS would not say whether it specifically is lobbying against the proposed deal.

CVS shares were down 3.6 percent at $34.90 in afternoon trading amid a broad market sell-off. The shares of Walgreen, the largest U.S. drugstore chain, fell 0.7 percent to $37.86.


For its drugstore unit, which operates more than 7,200 stores and accounts for a little more than half of total revenue, CVS now expects sales at stores open at least a year to rise 1.5 percent to 2.5 percent, down from a May forecast of 2.5 percent to 4.5 percent. Net drugstore revenue is now expected to rise 3 percent to 4 percent, down from a May forecast of 4 percent to 6 percent.

Sales at stores open at least a year, or same-store sales, rose 2 percent in the second quarter, but fell short of some estimates. Analysts' consensus forecast was 3.1 percent, according to Bernstein analyst Helene Wolk.

Sales at stores open at least a year across a variety of chains, excluding CVS, rose 4.4 percent in July.


Adjusted earnings from continuing operations were flat at 65 cents per share, topping analysts' average forecast by a penny, according to Thomson Global Markets I/B/E/S.

Net income attributable to CVS Caremark was $816 million, or 60 cents per share, compared with $821 million, or 60 cents per share, a year earlier.

Revenue rose 10.9 percent to $26.63 billion, just short of the $26.77 billion expected by analysts.

Retail revenue rose 3.6 percent to $14.8 billion.

Revenue in the pharmacy services business jumped 23.2 percent to $14.6 billion, due in part to the addition of a previously announced major contract with Aetna Inc (AET.N).

CVS now expects pharmacy services revenue to rise 23 percent to 24 percent this year, compared with a prior forecast of 23 percent to 26 percent. The unit's operating profit is now expected to fall 7 percent to 9 percent, compared with a prior target of a 5 percent to 9 percent drop.

CVS expects to earn $2.75 to $2.81 per share from continuing operations this year, versus its prior forecast of $2.72 to $2.82. The average forecast of analysts is $2.78.

CVS forecast third-quarter adjusted earnings of 66 cents to 68 cents per share. Analysts were looking for 68 cents.

The company, formed through CVS's 2007 acquisition of Caremark, continues to cooperate with the FTC in its ongoing investigation into the combined company's business practices, Denton said. The probe began in August 2009.

(Reporting by Jessica Wohl; editing by Lisa Von Ahn, Gerald E. McCormick and Andre Grenon)

Huntsman shares plunge 31 percent after profit miss

Huntsman shares plunge 31 percent after profit miss

Stock Market Predictions

NEW YORK (Global Markets) - Huntsman Corp (HUN.N) shares lost nearly a third of their value on Thursday after the chemical maker's second-quarter profit missed Wall Street's expectations because of higher supply costs.

The results confirmed what many chemical investors have feared for the past year: rising costs for crude oil and other feedstocks cannot be passed on to customers indefinitely.

Chief Executive Peter Huntsman, brother of U.S. presidential candidate Jon Huntsman, said the stock drop caught him off guard.

"Frankly, I'm very surprised," Huntsman told Global Markets. "I think that we had one of the strongest quarters in the history of our business."

(For a graphic on Huntsman results, click on:

Huntsman's larger rivals Dow Chemical (DOW.N) and DuPont (DD.N) for the most part were able to pass higher costs to their customers given their scale, though analysts were skeptical that the trend will continue.

Huntsman's cost of goods sold rose 24 percent from a year earlier to $2.43 billion in the second quarter.

While the company was able to boost prices for titanium dioxide, a key paint pigment, and chemicals used to make pesticides and cosmetics, price increases eroded demand for Spandex and other textile products.

The company said results will turn around.

"This is going to be one of the strongest years, if not the best year, we've had in our history," Huntsman said.

Analysts lashed out at the company's results.

Huntsman's earnings missed expectations because of "multiple missteps," said Jefferies & Co analyst Laurence Alexander.

Jeff Zekauskas, a JPMorgan analyst, was bothered because the company reported results only 90 minutes before the conference call, leaving him little time to wade through unusually complex financial tables.

"It's very difficult to reconcile all of the income statement numbers to the data that you provide," Zekauskas told Huntsman executives on a conference call.

Huntsman said he thinks his company gives the right amount of information.

"We're certainly going to be looking internally as to any changes we would make," he said. "I think we give plenty of pages of financial information."


The company reported quarterly net income of $114 million, or 47 cents per share, unchanged from a year earlier.

Excluding restructuring costs and one-time items, the company earned 48 cents per share. By that measure, analysts expected 49 cents, according to Thomson Global Markets I/B/E/S.

Revenue rose 25 percent to $2.93 billion. Analysts expected $2.77 billion.

Part of the earnings miss was caused by foreign currency rates.

Huntsman operates two key businesses in Switzerland. The Swiss franc has risen against the U.S. dollar in the past year, and that dented Huntsman's results by nearly $20 million.

"I can't recall another quarter when we have been so adversely affected by currency fluctuations," Huntsman said.


Jon Huntsman, former U.S. envoy to China and son of Huntsman Corp's founder, is a Republican presidential candidate. He is also a former company executive.

The presidential run has not affected the company, Peter Huntsman said. "I've not seen us pick up any business, or lose any business, because of his candidacy."

Huntsman could not remember if his brother's "Huntsman for President" sign was on his front lawn.

"To be honest with you, I haven't been home for the past couple of months. I've been traveling," he said. "If we don't have one up by now, I'm sure we will soon."

Huntsman shares closed down 31 percent at $12.50 on Thursday. The stock has traded between $8.47 and $21.52 in the past 52 weeks.

(Editing by Derek Caney, Matthew Lewis, John Wallace and Robert MacMillan)

Eastman Chemical sets two-for-one split; raises div

Eastman Chemical sets two-for-one split; raises div

Stock Market Predictions

(Global Markets) - Eastman Chemical Co (EMN.N), which makes chemicals, plastics and fiber, on Friday announced a two-for-one stock split and raised its dividend.

The company said the stock split will be in the form of stock dividend payable on October 3. Its common stock will start trading on a split-adjusted basis on Oct 4.

The Kingsport, Tennessee-based company also raised its quarterly dividend by 11 percent to 52 cents a share, which will also be payable on October 3.

Eastman shares were trading up 50 cents at $86.28 in morning trade Friday on the New York Stock Exchange.

(Reporting by Divya Lad in Bangalore; Editing by Joyjeet Das)

LinkedIn follows up IPO with strong 2011 outlook

LinkedIn follows up IPO with strong 2011 outlook

Stock Market Predictions

NEW YORK/LOS ANGELES (Global Markets) - LinkedIn Corp projected faster-than-expected 2011 revenue growth after chalking up a surprise second-quarter profit, as the professional networking site sets off to prove it can fulfill the promise of its monster IPO and rich valuation.

Shares of the company -- whose services are used by professionals seeking jobs or contacts and companies hoping to fill vacancies -- climbed almost 5 percent in after-hours trade, recouping some of their 9.6 percent loss during the regular session in which markets tanked.

They have more than doubled since LinkedIn's monster May debut, when it became the first prominent U.S. social networking site to go public, whetting the appetite of investors for a Facebook IPO while fanning fears of another dotcom bubble reminiscent of the late 1990s.

Investors pored over the company's first full results report for clues as to whether the stock's lofty valuation at more than 30 times 2010 sales was justified. They picked out healthy growth in both revenue and members.

The Mountain View, California company had warned it will not be profitable in 2011 as it shovels funds into expansion -- hiring field sales representatives and launching new products. But investors brushed off those concerns for now.

"We see great things for it. Some of what is happening in the marketplace is, investor demand for social media companies is taking precedence over the cash value of the underlying shares," said Evercore Partners analyst Ken Sena.

"They did set the bar really low. The numbers needed to be good to support the lofty valuation."

LinkedIn will now try to sustain its growth both by encouraging its 120 million-odd members to consistently use the site and seek out new international audiences, though the U.S. job market struggles to get out of a persistent slump.

It forecast third quarter revenue of $121 million to $125 million, ahead of analysts' projections for $111.8 million. And the company foresees revenue of $475 million to $485 million in 2011, again ahead of estimates for $467.7 million.


LinkedIn is one of clutch of closely watched Internet social media companies -- including Groupon, Zynga, Twitter and Facebook -- that have stoked investor interest and seen their valuations balloon.

The company -- started in the living room of ex-PayPal executive Reid Hoffman who co-founded the company in 2002 -- makes money by selling premium subscriptions to its members and by helping companies with hiring and marketing.

Its membership base -- a closely watched metric as the underpinnings of its hiring and advertising business model -- climbed to 115.8 million at the end of June, up 61 percent.

LinkedIn said second-quarter revenue leapt 120 percent to $121.0 million, surpassing an average forecast of $104.73 million according to Thomson Global Markets I/B/E/S.

Second-quarter net profit rose slightly to $4.5 million from $4.3 million a year earlier. Excluding certain items, it earned 4 cents a share, outstripping forecasts for a loss of 3 cents a share.

In particular, revenue from hiring solutions, or services that help companies hire employees -- which makes up the bulk of the social network's business -- surged 170 percent to $58.6 million, racing past expectations.

Revenue from marketing solutions jumped 111 percent to $38.6 million, while sales of premium subscriptions rose a more sedate 60 percent to $23.9 million.

Shares of the company gained about 5 percent to $99.80 in after-hours trade, after shedding more than 9 percent of their value to close at $95.52 in regular NYSE trading.

(Editing by Gary Hill, Richard Chang and Bernard Orr)

CF Industries profit widely beats; shares jump

CF Industries profit widely beats; shares jump

Stock Market Predictions

NEW YORK (Global Markets) - Fertilizer producer CF Industries Holdings Inc's (CF.N) quarterly profit soundly beat Wall Street's expectations as higher nitrogen prices offset a dip in sales due to a wet spring.

Shares rose 5.8 percent in after-hours trading on Thursday, partly erasing a steep drop in regular trading with the broader markets.

CF makes nitrogen and phosphate fertilizers, both crucial material for farmers.

CF is bullish on the 2011 U.S. corn crop, saying that despite the wet spring it expects more than 90 million acres of the grain to be harvested and farmers to still be extremely profitable.

"We're in for a pretty good return here," CF Industries Chief Executive Steve Wilson told Global Markets. "We're going to have a good corn crop this year."

The company quadrupled its quarterly dividend to 40 cents per share, said it would spend $1 billion to $1.5 billion in the next four years on capital projects, and authorized a stock repurchase plan of up to $1.5 billion.

Most of the capital spending will go to improve existing plants, Wilson said.

CF has benefited from sliding prices for natural gas, one of the main building blocks for nitrogen. It also is partly immune to the global economic crisis given the essential nature of its products.

"The demand-driver for us is the need to feed the world," Wilson said. "We are very confident with our outlook."


For the second quarter, the company posted net income of $487.4 million, or $6.75 per share, compared with $105.1 million, or $1.54 per share, in the year-ago quarter.

Excluding a drop in the market value of natural gas trading positions, CF earned $6.87 per share.

By that measure, analysts expected earnings of $5.94 per share, according to Thomson Global Markets I/B/E/S estimates.

Revenue rose 38 percent to $1.8 billion. Analysts expected $1.77 billion.

CF controls about two-thirds of the ammonia supply in the U.S. corn belt. Urea and other nitrogen-based fertilizers come from ammonia.

While CF's ammonia sales dipped about 18 percent to 981,000 tons during the quarter, its average selling price jumped 57 percent. Ammonia is CF's largest product group.

CF's buyout of rival Terra Industries last year made CF the world's second-largest producer of nitrogen, after Norway's Yara (YAR.OL), by increasing its number of fertilizer plants to seven from two.

Shares of CF rose 5.8 percent to $149.26 in after-hours trading. The stock had plunged nearly 9 percent in regular trading as major stock market indexes dropped more than 4 percent on broader economic woes.

(Reporting by Ernest Scheyder; Editing by Gary Hill)

Investors unconvinced by Weight Watchers outlook

Investors unconvinced by Weight Watchers outlook

Stock Market Predictions

BANGALORE (Global Markets) - Weight Watchers International Inc's (WTW.N) raised 2011 outlook failed to impress growth-hungry investors, amid concerns over its high ad spend, wiping out almost a quarter of its market value.

Weight management companies have rebounded after the recession, when people had scaled back discretionary spending. However, this has also heightened investor expectations.

Weight Watchers' shares have nearly doubled this year as many investors have bet on it being the chief beneficiary of a resurgent weight loss industry.

In February, the stock jumped 45 percent after it reported market-topping results, but fell 5 percent in May even after it raised its profit outlook.

"Expectations for the back half of the year are higher than what the management brought out today," Morningstar analyst Peter Wahlstrom told Global Markets.

Wahlstrom said the company is being cautiously optimistic and realistic in its forecast, while Wedbush Securities analyst Kurt Frederick reckons investors are probably worried the company's increased spending may hurt earnings.

"They have invested in IT, hiring people, increased salaries. Increased investments is the reason why their guidance is a little bit weaker than what people thought it would be," Wedbush analyst Frederick said.

The company has ramped up spending on marketing and selling and administrative operations, to gain an edge on their rivals like Nestle's (NESN.VX) unit Jenny Craig Inc and Medifast Inc (MED.N).

Weight Watchers, known for its ads featuring American Idol contestant Jennifer Hudson, launched an ad campaign targeting men through the NBA playoffs earlier this year.

The company, which helps customers lose weight through organizing meetings and offering nutritional advice, raised its full-year earnings outlook to $3.85-$4.05 a share from its prior view of $3.75-$4.00 a share.

Analysts, on average, were expecting earnings of $3.96 a share, according to Thomson Global Markets I/B/E/S.

Weight Watchers second-quarter net income came in at $1.17 a share, topping analysts' expectations by 5 cents. Sales jumped 29 percent to $486 million, also beating market estimates of $470.2 million.

Last week, peers Nutrisystem (NTRI.O) and Herbalife (HLF.N) also posted market-beating profits spurred by increasing fitness awareness among consumers.

Shares of the company were down 16 percent at $62.52 on Friday afternoon on the New York Stock Exchange.

(Additional reporting by Abhishek Takle and Mihir Dalal; Editing by Viraj Nair)

P&G results top views; quarter outlook falls short

P&G results top views; quarter outlook falls short

Stock Market Predictions

CHICAGO (Global Markets) - Procter & Gamble Co is likely to miss Wall Street earnings estimates this quarter as it has not yet pushed through all its price increases that are meant to help deal with higher commodity costs.

Sluggish economies in major markets such as the United States also weighed on the company.

The world's largest household products maker posted a bigger-than-expected rise in fourth-quarter profit on Friday, aided by cost cuts, some early price increases and, analysts said, a better-than-anticipated tax rate.

P&G's initial wide forecast for fiscal 2012 suggests this year's profit could meet expectations, though the company sees commodity costs weighing on results this quarter.

Shares of P&G, whose lineup includes Gillette razors and Olay skin creams, were up slightly at $60.12 after the results and data from the U.S. Labor Department showed that private employers stepped up hiring in July.

Analysts said parts of the quarterly report were of poor quality, such as gross margin down 1.2 percentage points.

"Overall, we find the result disappointing, albeit unsurprising," said Stifel Nicolaus analyst Mark Astrachan, "given macro uncertainty and continued weak consumer spending in developed markets."

Consumers are still buying the company's products, although sales are better in developing markets, where P&G sells more of its lower-priced items.

That is likely to continue to be the case in the near term.

"We've not seen dramatic changes in consumer behavior over the last few months," said Chief Executive Officer Bob McDonald.

Shares of P&G and other major consumer products companies are often seen as safe havens. Lately, however, the stock has underperformed the market. P&G shares fell 7.3 percent from the beginning of the year through Thursday's broad market sell-off. The Standard & Poor's 500 index was down just 4.6 percent over the same period.


P&G has been raising prices to help offset the increase in costs for oil-based materials and other goods. It already announced or implemented price increases on brands that account for about 60 percent of its U.S. sales so far this calendar year, said McDonald.

P&G has also pulled back on some promotional spending as other household products makers have been doing, he added. That also has the effect of raising prices for consumers.

P&G, the world's largest advertiser, will keep spending on marketing and research and development as it tries to entice shoppers to buy higher-priced products such as Crest 3D White toothpaste and Fusion ProGlide razors.

P&G spent $9.3 billion, or 11.3 percent of sales, on advertising in fiscal 2011. That is more than the annual revenue of competitors such as Church & Dwight Co Inc, Clorox Co or Estee Lauder Cos Inc.


While P&G is seeing growth in emerging markets such as China, they are still smaller markets for the company, which got just 24 percent of 2010 sales from Asia and Latin America.

The United States is by far the company's largest market, accounting for 38 percent of total sales in 2010, the latest year for which such geographic data is available.

The average customer in China spends less than $3 a year on P&G's products, while in the United States the average is nearly $100, McDonald said.

On Thursday, P&G rival Unilever registered strong sales helped by price increases and growth in emerging markets.

P&G expects sales and earnings to be stronger in the second half of the year than the first half. Overall, the company expects to spend roughly $1.8 billion to $2 billion more on commodities this year, on top of the $1.8 billion increase it saw in fiscal 2011, said Chief Financial Officer Jon Moeller.

For the first quarter ending in September, P&G forecast earnings per share of $1.00 to $1.04 from continuing operations, with organic sales up 2 percent to 4 percent.

For the fiscal year, P&G said it expected earnings per share of $4.17 to $4.33 from continuing operations, with organic sales up 3 percent to 6 percent.

Analysts were expecting earnings of $1.14 this quarter and $4.26 this year, according to Thomson Global Markets I/B/E/S.

P&G earned $2.51 billion, or 84 cents per share, in the fourth quarter ended in June, compared with $2.19 billion, or 71 cents per share, a year earlier.

Analysts expected earnings of 82 cents per share.

Sales rose 10 percent to $20.86 billion, while analysts had forecast $20.63 billion.

Organic sales, which strip out the impact of acquisitions, divestitures and foreign exchange fluctuations, rose 5 percent. About 1 percentage point of that growth probably came from retailers buying products ahead of price increases, Moeller said. The volume of goods sold rose 3 percent.

(Reporting by Jessica Wohl; Editing by Lisa Von Ahn, Phil Berlowitz)

Apache quarterly profit up, tops Street

Apache quarterly profit up, tops Street

Stock Market Predictions

HOUSTON (Global Markets) - Apache Corp (APA.N) reported a better-than-expected 40 percent increase in quarterly profit on Thursday, fueled by record oil and natural gas production and higher crude prices.

Shares of Apache, which has operations in Australia, the U.S., Egypt and the North Sea, fell 7 percent, weighed down by the market's broad losses and weakness in crude oil.

Most oil and gas companies saw profits rise in the second quarter as oil and natural gas prices rose from a year ago. U.S. benchmark WTI crude prices averaged $102 in the quarter, up 32 percent, while natural gas prices rose about 6 percent.

Oil and natural gas liquids -- which bring higher prices than "dry" gas -- accounted for 48 percent of Apache's production and 78 percent of its revenue, the Houston company said.

"They have a good amount of their production tied to Brent, which is a good thing," said Mark Hanson, oil analyst at Morningstar.

European Brent oil prices averaged $117 per barrel in the second quarter, higher than WTI.

Apache's profit in the second quarter was $1.2 billion, or $3.17 per share, compared with $860 million or $2.53 per share, a year earlier.

Excluding one-time items, earnings were $3.22 per share. Analysts had expected $3.09, according to Thomson Global Markets I/B/E/S.

Oil and gas output rose 16 percent to a record 749,000 barrels of oil equivalent (boe) per day.

Apache outlined some operational bumps that might have a small affect on production in the current quarter.

Operations at the company's Forties Field in the North Sea will be shut for several days as the pipeline operator, BP Plc (BP.L)(BP.N), clears ordnance from World War II away from the system, Steve Farris, Apache's chief executive said on a conference call with analysts.

The field should restart on Friday or Saturday, the executive said.

Some analysts had expected Apache's oil and gas production be even greater. Barclay's Capital pegged it at 759,000 boe per day, while Simmons & Co expected 756,000 boe per day.

Apache also said on Thursday it had made two new oil discoveries in Egypt's Faghur Basin. The company has drilled 11 wells in the Faghur Basin this year, uninterrupted by unrest in that country.

Demand for natural gas in Egypt has not diminished and the company has seen no interruption in payments for its oil and natural gas production in that country, Farris said.

Apache shares fell $8.58 to $109.87 in late trading on the New York Stock Exchange.

(Reporting by Anna Driver; editing by Gerald E. McCormick, Dave Zimmerman, John Wallace and Andre Grenon)

Analysis: Battered healthcare stocks ready for rebound

Analysis: Battered healthcare stocks ready for rebound

Stock Market Predictions

NEW YORK (Global Markets) - Sharp falls in U.S. healthcare stocks this week -- where industry bellwethers dropped as much as 8 percent in one day -- were a premature sell-off, analysts say, as the sector's underlying fundamentals remain strong.

Companies from hospital operator HCA Holdings Inc to drugmaker Pfizer Inc came under pressure before the broader market sell-off on Thursday on concern about possible government cuts to the Medicare health program for the elderly under a new U.S. debt deal.

Analysts say there is potential for some sector stocks to see a rebound of up to 15 percent.

"The reaction by and large is probably overdone," said Bob Phillips, co-founder of Spectrum Management Group in Indianapolis. "A number of these stocks are still paying great dividends and valuations are incredibly great."

Healthcare had been the best performing sector during the first half of the year, with healthcare exchange-traded funds and products garnering $859.3 million in net new assets, according to the latest BlackRock ETF industry report.

"Demographically, no matter how you shake it, the population is aging, people will require more healthcare as they age," Phillips said. "We're comfortable with the overall sector and think it will do well over the next 10 years, whether the government is the direct payer or not."


Healthcare providers face the most pressure, given that Medicare costs -- which are expected to nearly double in 10 years -- are likely to be first on the chopping block as Washington works to trim down its deficit.

"Cutting benefits to Medicare is cutting benefits to providers," said ETF Digest Editor Dave Fry.

Insurers UnitedHealth Group Inc and Humana Inc are two stocks that have been heavily battered, both down about 13 percent from the start of last week. They fell below their key 100-day moving averages for the first time this year, which could set up a healthy rebound in the near term.

"That tends to be a pretty strong level of support," said King Lip, chief investment officer at Baker Avenue Management in San Francisco. "We'll probably see a few more days of normal trading here, but the stocks could easily rebound 10 to 15 percent."

Both companies raised their full-year earnings forecasts. UnitedHealth raised its range by 20 cents to a range of $4.15 to $4.25 per share. Humana raised its range by 60 cents to a range of $7.50 to $7.60 per share.

Analysts at Credit Suisse gave Humana an "outperform" rating this week and said the stock's dip presents a good buying opportunity, noting it is well-positioned to pass cuts through to providers and members.

The analysts said Humana is trading at nine times their 2012 EPS estimate, UnitedHealth is trading around 11 times their EPS estimate.

"We believe HUM is undervalued considering our estimate for 9 percent organic enrollment growth in the core Medicare Advantage product next year," the analysts wrote in a note.


Some healthcare product and pharmaceutical companies, which took a hit with the broader sector, have upside potential.

Lip noted that this year's healthcare rebound followed a substantial dip in the wake of the U.S. healthcare law, which passed early in 2010, and expects a similar pattern now.

"A lot of these stocks sold off because of overall fear. The fact of the matter is they rebounded after that and started hitting new highs," he said. "We see similar issues here with people selling the news. But after things calm down and are not as bad, we'll see institutional buyers come back."

Drug and device makers Abbott Laboratories and Johnson & Johnson, both down around 6 percent since mid-July, are attractive stocks to Phillips.

Johnson & Johnson is a potential buy now for 13 times its earnings. The stock had been trading in a range of $65 to $67 since late April. This week it fell as low as $61.05.

The stock is also trending below its 100-day moving average for the first time since mid-April this week. The last time Johnson & Johnson opened below its 100-day moving average, it rose about 6.5 percent within two days.

Phillips said Abbott, with a 14.9 price to earnings ratio, is a "compelling valuation." A price-to-earnings ratio below 15 is considered attractive for the health sector as it translates to about a 7 percent earnings yield, Phillips said.

Abbott shares were down 6 percent since the start of last week, after gaining 10 percent from the start of the year.


Since each company will be affected differently by any cuts to healthcare spending, ETFs tracking the broader sector may begin to look more attractive to investors hoping to mitigate company-specific risk by diversifying opportunities.

The iShares Dow Jones Health Care Providers Index Fund had been up about 20 percent since the start of 2011, but dropped about 11 percent over the past week.

The ETF is likely to be under the most pressure because it is solely built upon providers. It tracks 52 stocks and has a 14.1 percent weight in UnitedHealth, its biggest holding, and a 4.6 percent weight in Humana.

The SPDR Health Care Select Sector Fund is a more diversified healthcare ETF, consisting of 54 holdings with 48.7 percent in pharmaceuticals, 19.4 percent in healthcare providers and services, 16.5 percent in healthcare equipment and supplies, among its biggest holdings.

The ETF is down about 8 percent since the start of last week, dipping below its 200-day moving average for the first time this year on Tuesday. The ETF had previously been trading in a high range of $34 to $36, about a 12-percent gain from the start of the year.

"These stocks have been unfairly punished on something that might not even occur," Baker Avenue's Lip said. "Nothing is written in stone yet. I think we'll definitely see a rebound in the short term, or at least more of a technical bounce."

(Editing by Andrew Hay)