Tuesday, January 25, 2011

Johnson & Johnson (NYSE: JNJ): Q4 Earnings Preview 2010

Johnson & Johnson (NYSE: JNJ), the world's largest health-products company, is scheduled to release fourth-quarter earnings before the market open on Tuesday, January 25, 2011. Analysts, on average, expect the company to report earnings of $1.03 per share on revenue of $16.08 billion. In the year-ago period, the company reported earnings of $1.02 per share on revenue of $16.55 billion.

Johnson & Johnson engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three business segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics.

In the preceding third-quarter, the New Brunswick, New Jersey-based company's net income was $3.42 billion, or $1.23 a share, compared to $3.35 billion, $1.20 a share, in the same quarter last year. Revenue slipped 0.7% to $14.98 billion from $15.08 billion. Analysts, on average, expected the company to report earnings of $1.15 per share on revenue of $15.18 billion. 

At its last earnings call in November, the healthcare giant boosted its earnings outlook for full-year 2010 to $4.70 to $4.80 per share, reflecting recent currency exchange rates. The company's guidance excludes the impact of special items. Previously, the company full-year 2010 earnings to be in the range of $4.65 to $4.75 per share, which excludes the impact of special items. 

The healthcare-giant's reputation has been severely tarnished in recent months due to a string of product recalls. In November, the company issued a mrecall of its children's-strength Benadryl and Motrin products because of manufacturing problems. In December, the comany said that it was recalling some of its Rolaids antacid products because of possible metal and wood particle contamination.  The company will not be in a position to resume normal supply of all the recalled products before the first quarter of 2011. Meanwhile, the Fort Washington plant, which has been shut down, is not expected to be operational until late 2011. Johnson & Johnson is also facing legal action related to the product recall.

During the quarter in review, the U.S. Food and Drug Administration put clinical testing of Johnson & Johnson's new pain medication fulranumab on hold due to safety concerns, the company said Tuesday. 

In the short term, Johnson & Johnson will need to overcome challenges like the product recalls and patent expires. The long term outlook remains strong. The pharmaceutical group has a robust late-stage product pipeline. New medical devices, including ceramic orthopedics and minimally invasive surgical tools have been created. Demographic trends like the aging of the population in the developed countries and health care market growth in developing countries will support further sales growth. Johnson and Johnson’s diversified business model, lack of cyclicality and strong financial position will help it in tough situations. Moreover, Johnson & Johnson has been entering deals, which should help boost its revenues in the long-term.

In terms of stock performance, JNJ shares have lost nearly 4 percent over the past year.

Full Disclosure: None.
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