Johnson & Johnson Q3 Preview: Shares Need Firm Guidance After July Fall

Johnson & Johnson (NYSE: JNJ), the healthcare group behind prescription medicines and medical devices, reports third-quarter results on Tuesday. The release is due at 11:45 UK time and the management call at 13:30, ahead of the US open at 14:30.

The shares closed Friday at $261.44, up 1.93% on the day and about 26% this year, but about 7% below the 2nd of September peak of $281.07 and down 2.1% over the past month. The forward dividend is $5.36 a share, a yield of 2.05%.

The last report shows why a beat may not be enough. On the 15th of July J&J posted adjusted earnings per share, which strip out one-off items, of $2.90 against the $2.84 analysts expected, on revenue of $25.31bn, up 6.6%. It also reportedly raised its outlook, yet the shares fell 2.7% that day.

Consensus revenue for this quarter is around $25.38bn. Adjusted EPS was $2.80 in the third quarter a year ago, and the last four quarters have all come in at or above estimates.

The business is mid-handover. Sales of Stelara, hit by biosimilars (cheaper copies of a drug), fell by more than half to about $740m last quarter, and Imbruvica faces competition. Tremfya, which passed $2bn, Carvykti and Icotyde are meant to fill the gap, while MedTech, the devices arm, was expected to improve in the second half.

Broker targets sit above the current price. JPMorgan raised its target to $285 from $270 with a Neutral rating, RBC’s is $290, and Guggenheim rates the shares Buy with a $287 target.

The raised full-year guidance is the main test. It was reported to put revenue at a midpoint of about $101.1bn and adjusted EPS at $11.60 to $11.75. Also in focus are Innovative Medicine against the Stelara drag, MedTech cardiovascular, and the talc and drug-pricing overhangs.