JnJ Beats Q2 Analysts Estimates, Boosts FY19 Revenue View

JnJ Beats Q2 Analysts Estimates, Boosts FY19 Revenue View
July 17, 2019


Johnson & Johnson (NYSE: JNJ) surprised the equity market yesterday by reporting a second-quarter profit that soared 42% on y-o-y basis, with all three of its business divisions exceeding analysts’ forecasts. The manufacturer of Acuvue contacts and cancer drugs like Zytiga upwardly revised its revenues outlook for fiscal 2019 while reaffirming its earnings view. The stock closed at $132.50, down $2.21 or -1.64% from the prior close.

The New Jersey-based company reported revenues of $20.56 billion, down 1.3% from $20.83 billion in the corresponding period last year. The manufacturer of Aveeno lotion still surpassed Wall Street’s revenue estimates of $20.29 billion.

For the second quarter, the company reported earnings of $5.61 billion, or $2.08 per share, compared with $3.95 billion, or $1.45 per share, in the year-ago period. Excluding an intangible amortization expense and other items, the world’s largest manufacturer of health care products posted adjusted earnings of $6.95 billion or $2.58 per share in the second quarter of 2019. Analysts had anticipated Johnson & Johnson to report earnings of $2.46 per share, as per the survey made by Thomson Reuters. In the year-ago period, the company posted adjusted earnings of $5.72 billion or $2.10 per share. Notably, the successful divestment of its Advanced Sterilization Products business boosted JnJ’s second-quarter earnings by nearly $0.20 per share.

Segment-wise, J&J’s pharmaceutical business, which generates nearly half of the company’s revenue, posted revenue of $3.54 billion, beating the $3.52 billion anticipated by StreetAccount analysts. This division manufactures psoriasis drugs like Stelara and Tremfya.

The company’s consumer division, which manufactures Aveeno body care and namesake baby care products, posted revenues of $3.54 billion, exceeding analysts’ forecasts of $3.52 billion. The company’s medical device business, which includes Ethicon surgical goods, recorded revenues of $6.49 billion. The Street had expected revenues of $6.43 billion.

Furthermore, JnJ boosted its sales outlook for fiscal 2019 to a range of between $80.80 billion and $81.60 billion. The upwardly revised sales outlook reflects an increase in operational growth in the range of 1% to 2%. The company had previously issued fiscal 2019 sales view in the range of $80.40 billion to $81.2 billion, representing an increase in operational growth in the range of 0.5% to 1.5%.

JnJ also reaffirmed its outlook for adjusted earnings in the range of between $8.53 and $8.63 per share. This represents an increase in operating earnings per share growth of 6.7% to 7.9%. On average, analysts surveyed by Thomson Reuters anticipate the firm to report earnings of $8.60 per share on revenues of $81.22 billion.

Commenting on the results and upbeat outlook, JnJ Chief Financial Officer Joe Wolk stated: “If you look at our earnings growth this year, we’re maintaining it, it’s two times the rate of sales growth. We think that’s very healthy, and we look to the long term, so this gives us a great opportunity to invest in our portfolio, to either accelerate, fortify or even add to our pipeline going forward so that we do solidify not just the next six months, but many, many, many more years to come.”

Commenting on the results, SVB Leerink analyst Danielle Antalffy opined that she is concerned about the ongoing talc related lawsuits faced by the company. Ms.Antalffy feels that the lawsuits seriously threaten the family-friendly image of the company. JnJ, however, asserts that it’s baby products are safe and has set aside $190 million in the quarter to defend itself.

Despite the strong Q2 results and optimistic outlook, the stock is expected to remain range-bound due to the 1000s of talc related lawsuits faced by the company.

Technically, the stock has made a triple top bearish reversal pattern, as shown in the image below. The stochastic indicator is also descending, while the stock is trading below its 50-day moving average. As a result, we can expect the stock remain bearish in the short-term.

jnj - technical analysis - 17th July 2019

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Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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