Earnings preview: There is optimism for Johnson & Johnson in Q2 2019 despite setbacks

Johnson & Johnson (NYSE: JNJ) is scheduled to report second-quarter 2019 earnings results on Tuesday, July 16, before market open. Analysts have projected earnings of $2.43 per share on revenue of $20.3 billion.

The company has consistently beat earnings estimates in the last four quarters and this trend can be expected to continue in the second quarter as well. The quarterly results are expected to benefit from strength in the pharmaceuticals division backed by a solid product portfolio.

In May, J&J said it was going to roll out an extensive program to boost the pharmaceutical division by seeking regulatory approval of 40 line-extensions for formulations under development. The five-year plan is expected to help the company achieve growth that exceeds the industry.

J&J’s top line results are expected to benefit from the healthy performance of its products like Imbruvica, Darzalex, and Stelara. However, total revenue could be hurt by the lower sales of Remicade. The results are also likely to see a negative impact from the divestiture of the Advanced Sterilization Products unit as well as generic competition.

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The weakness in the consumer division is expected to continue in the second quarter. J&J faces additional challenges in the form of multiple lawsuits that have been filed against the company on grounds that some of its talc brands contain carcinogens. These litigations are expected to cost the company a significant amount of money.

Despite these setbacks, the general sentiment around Johnson & Johnson’s earnings is positive. The majority of analysts have rated the stock as a Strong Buy while none have rated it Sell.

In the first quarter of 2019, J&J posted flat revenues along with a growth of 2% in adjusted EPS. Sales rose 4% in the pharmaceutical division while the consumer and medical devices segments saw sales declines.  

For the full year of 2019, J&J expects reported sales in the range of $80.4 billion to $81.2 billion and adjusted EPS in the range of $8.53-8.63.

Johnson & Johnson’s shares have gained 9% so far this year and over 2% in the past three months. The stock was down 1% in morning hours on Friday.

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