Following the release of fourth quarter and full year 2011
results, most of the analysts covering
Johnson & Johnson
) have reduced their earnings estimates for 2012 and 2013. The
revisions in estimates mainly reflect the guidance provided by the
Fourth Quarter and Full Year 2011 Recap
Johnson & Johnson posted fourth quarter 2011 earnings
(excluding special items) of $1.13 per share, three cents above the
Zacks Consensus Estimate of $1.10 and 9.7% above the year-ago
earnings of $1.03..
Johnson & Johnson's revenues for the fourth quarter
increased 3.9% year-over-year to $16.3 billion. Revenues were
in-line with the Zacks Consensus Estimate.
Full year 2011 earnings came in at $5.00, 5% above the year-ago
earnings of $4.76 per share and 4 cents above the Zacks Consensus
Estimate. Earnings came in at the top end of the company's guidance
of $4.95 - $5.00 per share.
Meanwhile, revenues came in at $65 billion, up 5.6% from the
year-ago period and in-line with the Zacks Consensus Estimate and
the company's guidance. (Read our detailed earnings report at:
J&J Beats, 2012 Outlook Disappoints
Agreement of Analysts
Estimates for 2012 indicate a significant negative bias. All 22
analysts covering the stock have cut their estimates for 2012
following the release of fourth quarter results.
Estimates are down for 2013 as well. 11 of the 19 analysts
covering the stock have lowered their 2013 estimates in the last 30
days with only 1 analyst moving in the opposite direction. Over the
last 7 days, 2 analysts have lowered their estimates with no
movements in the opposite direction.
The downward revision in estimates reflects Johnson &
Johnson's disappointing outlook for 2012. The company expects
earnings of $5.05 to $5.15 per share, reflecting 3.5% -5.5%
operational growth. Currency fluctuations are expected to have a
negative impact of about 2.5%. 2012 earnings guidance was well
Moreover, the company expects to continue incurring significant
costs in 2012 (higher than 2011) as it works on addressing its
manufacturing issues and bringing back its McNeil Consumer
Healthcare products to the market.
Meanwhile, pricing pressure is expected to continue in 2012. The
company expects pricing pressure to negatively impact pretax
operating margin by 0.5% - 1% in 2012.
Year-over-year revenue comparisons will also be tough in the
first half of 2012 as Levaquin and Concerta started facing generic
competition from mid 2011.
Magnitude - Consensus Estimate Trend
The significant downward bias has resulted in 2012 earnings
estimates being trimmed by 11 cents to $5.11 in the last 30 days.
Meanwhile, 2013 estimates have gone down by 16 cents to $5.44 per
share in the last 30 days.
Neutral on Johnson & Johnson
We currently have a Neutral recommendation on Johnson &
Johnson. The stock carries a Zacks #4 Rank (Sell rating) in the
short run. We expect the stock to remain under pressure in the near
term given the below-consensus guidance provided by the
Our long-term Neutral recommendation on the stock is based on
the belief that 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 signing
deals, which should help boost its revenues in the long term.
JOHNSON & JOHNS (
): Free Stock Analysis Report
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