There's nothing like a solid earnings report to give a company a whole new outlook on life, and recently, Johnson & Johnson (NYSE:JNJ) posted its earnings report, which delivered a substantial boost to the company's fortunes in pre-market trading. While the news for the company isn't all good, the numbers produced from the earnings report should be sufficient to make anyone consider owning this stock...or picking up more of it.
Beating Expectations By the Numbers
There was no shortage of good news for Johnson & Johnson this quarter, as it brought in adjusted earnings of $2.20 per share. That's a little over 10% better than Refinitiv's consensus projections of $1.98 per share. Revenue figures also overwhelmed not only analyst consensus, but also last year's figures at this time, with revenue coming in at $21.08 billion for the quarter. That's well above the $20.72 billion generated at this time last year, and certainly better than the $20.2 billion in revenue expected for this quarter.
In another boost for the company's outlook, the company hiked its full-year guidance as well, bringing adjusted earnings for 2020 to $7.95 to $8.05 a share, up from the original projections of between $7.75 and $7.95. Total sales forecast for the year, meanwhile, also took an upward jump, going from between $82 billion and $82.8 billion, up substantially from the original range of $79.9 billion to $81.4 billion.
Just its pharmaceutical operations alone brought in $11.4 billion in revenue, which represented a 5% increase over the same time last year. Consumer operations—for products like the popular Listerine mouthwash brand—brought in $3.5 billion in revenue, with customers stocking up on essentials in the wake of potential lockdowns to come likely contributing to the gains. Better yet, the company's medical device unit saw hefty gains as well, up 1.7% over last year to bring in $6.1 billion as hospitals were allowed to reopen and engage in procedures not immediately related to the coronavirus.
Every Company Has Some Setbacks
It's true that every company has a few setbacks from time to time, and Johnson & Johnson had one of its own just recently. Its Phase 3 trials for a coronavirus vaccine were recently halted as one participant in the study developed an “adverse event.” It's worth noting here that the trial featured 60,000 participants overall, so just seeing one “adverse event” out of a sample size that big probably should have been expected on some level. Similar issues were recently seen in AstraZeneca (LON:AZN), whose own vaccine trials were recently shut down.
However, Johnson & Johnson is already on record saying that it means to take its time in development, with a commercially-available vaccine not in the cards until sometime next year. This is an unusual market strategy, especially given that much of the rest of the market is frantically hunting a first-mover advantage.
Additionally, the company is still having some troubles over talc; the company is currently defending a minimum of 19,000 lawsuits related to a connection between its Baby Powder product and ovarian cancer. Some analysts suggest that the ongoing lawsuits will keep the company in a comparatively narrow trading range for some time to come; it's already been in a fairly narrow range for most of the last three years.
The Current Issues May Be Priced In
It's a bit of a mixed picture for Johnson & Johnson, as far as our latest research goes. With four analysts having “hold” recommendations and 10 having “buy,” the stock is clearly a buy, but it's been sliding for the last six months. By way of reference, 180 days ago, the company had three “hold” and 13 “buy”. That went to four “hold” just 90 days later, and 12 “buy”. Then, 60 days after that, the “holds” held steady, and the “buy” ratings dropped to 11. Now, we're down to 10 “buy” ratings. However, in that entire time span, the company's price target has been swinging upward, from $160.50 180 days ago to $164.62 today.
The company's wide-ranging product line is proving both help and hindrance, as talc generates years of legal action, but medical devices and Listerine make for a consumer-friendly package that keeps drawing customers in. With Johnson & Johnson's chances of bringing a coronavirus vaccine to market starting to slip away—one issue in 60,000 isn't exactly a disaster, but with customers already skittish any problem that isn't visibly addressed is a problem that keeps customers away—those looking for explosive gains on a first-mover will want to look elsewhere. Those looking for stability, meanwhile, may be a lot happier here.
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