Healthcare was the best performing sector in the third quarter. The dual tailwinds of encouraging industry fundamentals and the sector’s defensive tilt led to the rally in the sector. The wave of mergers and acquisitions also added to its strength.

Popular ETFs like Health Care Select Sector SPDR Fund (XLV – Free Report) has gained 4.2%, while Vanguard Health Care ETF (VHT – Free Report), iShares U.S. Healthcare ETF (IYH – Free Report) and Fidelity MSCI Health Care Index ETF (FHLC – Free Report) are up at least 2.5% each over the past three months. The strength is likely to continue into the Q3 earnings season as some big names like Pfizer (PFE – Free Report) , Merck (MRK – Free Report) , Amgen (AMGN – Free Report) , AbbVie (ABBV – Free Report) , Gilead Sciences (GILD – Free Report) and Bristol-Myers Squibb (BMY) are lined up to report this week and in the next. All these stocks collectively account for 25.1% share in XLV, 23.2% in IYH, 22% in FHLC and 21.4% in VHT.

Let’s dig deeper into the earnings picture of these companies that will drive the performance of the abovementioned funds in the coming days:

According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while Zacks Rank #4 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Surprise Prediction for These Stocks

Pfizer has a Zacks Rank #3 and an Earnings ESP of -0.79%, indicating a lower chance of beating estimates this quarter. The stock has witnessed positive earnings estimate revision of a penny for the to-be-reported quarter over the past seven days. It delivered an average positive earnings surprise of 6.46% for the past four quarters. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good sign for the stock. Pfizer has a VGM Score of D. The company is scheduled to report earnings on Oct 30, before the opening bell.