Johnson & Johnson JNJ will report its third-quarter earnings on Oct. 15. The Zacks Consensus Estimate for sales and earnings is pegged at $22.19 billion and $2.19 per share, respectively. The Zacks Consensus Estimate for JNJ’s earnings has declined from $10.07 per share to $10.00 per share for 2024 and from $10.63 per share to $10.62 per share for 2025 over the past 60 days.
JNJ Estimate Movement
Image Source: Zacks Investment Research
JNJ's Earnings Surprise History
The healthcare bellwether’s performance has been pretty impressive, with the company exceeding earnings expectations in each of the trailing four quarters. It delivered a four-quarter earnings surprise of 3.29%, on average. In the last reported quarter, the company delivered an earnings surprise of 4.06%.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Image Source: Zacks Investment Research
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
JNJ's Stock Price & EPS Surprise
J&J has an Earnings ESP of -3.20% and a Zacks Rank #4 (Sell). Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping JNJ's Upcoming Results
Sales in Jonhnson and Johnson’s Innovative Medicines segment (previously the Pharmaceutical segment) are expected to have been driven by higher sales of key products such as Darzalex, Stelara, Tremfya and Erleada due to strong market growth and share gains.
The Zacks Consensus Estimate for Stelara sales is pegged at $2.51 billion, while our model projects sales of $2.53 billion.
For Darzalex, the consensus as well as our model estimates is pegged at $2.94 billion.
The Zacks Consensus Estimate for Tremfya is $1.05 billion, while our model projects sales to be 1.06 billion.
The consensus estimate for Erleada sales is $769 million, while our model projects sales to be $755.2 million.
Other products like Invega Sustenna and Uptravi are likely to show growth. The rapid adoption of new drugs like Carvykti, Tecvayli, Talvey and Spravato are likely to have contributed to top-line growth.
However, lower sales of its key medicine, Imbruvica are likely to have hurt the top line in the second quarter. Rising competitive pressure in the United States from novel oral agents is likely to have hurt sales of Imbruvica. The Zacks Consensus Estimate for Imbruvica is $728 million, while our model indicates sales to be $722.9 million. JNJ does not expect to record any sales from the COVID-19 vaccine in the third quarter.
Generic/biosimilar competition for drugs like Zytiga and Remicade is likely to have hurt the top line.
Overall, Innovative Medicine sales growth is expected to be slightly lower in the second half of the year compared to the first half due to the entry of Stelara biosimilars in Europe in July. A biosimilar version of Stelara was launched in certain European markets for certain indications in July 2024. Distribution rights for Remicade and Simponi in Europe will be returned in the fourth quarter, resulting in limited sales of these drugs in the third quarter.
The Zacks Consensus Estimate for JNJ’s Innovative Medicine unit is $14.11 billion, while our estimate is $13.97 billion.
In the second quarter, MedTech segment sales were hurt by a weak performance in China and competitive pressure in U.S. distributor stocking dynamics and the Vision category. Sales in China were hurt by the impact of the volume-based procurement (VBP) program, the anti-corruption campaign and a difficult comparison with the year-ago quarter. VBP is a government-driven cost containment effort in China. However, while issues in China may continue to hurt sales to an extent, overall operational sales growth in the MedTech segment is expected to accelerate in the third and fourth quarters supported by a recovery in contact lenses, further expansion into high-growth segments, including the integration of Shockwave, and continued expansion of new products.
The Zacks Consensus Estimate for JNJ’s MedTech segment is $8.07 billion, while our model estimate is $8.15 billion.
Nonetheless, a single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell or hold J&J’s stock.
JNJ's Stock Price Performance & Valuation
Year to date, J&J’s stock has risen 2.3% against an increase of 18.5% for the industry. The stock has also underperformed the sector as well as the S&P 500, as seen in the chart below.
JNJ Stock Underperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
From a valuation standpoint, JNJ appears attractive relative to the industry and is trading below its 5-year mean. Going by the price/earnings ratio, the company shares currently trade at 15.30 forward earnings, lower than 18.82 for the industry and the stock’s mean of 16.07.
JNJ Stock Valuation
Image Source: Zacks Investment Research
JNJ’s biggest strength is its diversified business model. With last year’s complete separation of the Consumer Health segment into a newly listed company called Kenvue KVUE, JNJ has now become a two-sector company focused on the Pharmaceutical and MedTech fields.
J&J’s Innovative Medicine (previously Pharmaceuticals) unit is performing at above-market levels. Its growth is being driven by existing products like Darzalex, Stelara, Tremfya, Uptravi and Erleada and also continued uptake of new launches, including Spravato, Carvykti and Tecvayli. The company has an interesting R&D pipeline that can generate innovative products and drive its growth further.
However, the softness in the MedTech unit, seen in the second quarter, was a concern. It remains to be seen if the trends improve in the third quarter. Also, Innovative Medicine sales growth is expected to be slightly lower in the second half of the year compared to the first half. The company is likely to continue to incur billions of dollars for legal expenses in future quarters due to its pending talc-based lawsuits. The lawsuits allege that its talc products contain asbestos, which caused many women to develop ovarian cancer. JNJ’s legal and other troubles have long been overshadowing its strengths.
New Investors Can Avoid JNJ Stock
No matter how the third-quarter results play out, we suggest a new investor should avoid buying the stock right now due to the uncertainty surrounding its legal battles and the expectation of slower sales growth in the second half.
Several other large drugmakers are generating better growth than JNJ and appear to be decent investment options. An investor interested in buying a large drugmaker may consider investing in Eli Lilly LLY instead, which has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
However, those who already own JNJ’s stock may stay invested for some time and see how its sales perform in the third quarter and if the company can manage to completely resolve its talc lawsuits.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Johnson & Johnson (JNJ) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
Kenvue Inc. (KVUE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
