Johnson & Johnson Earnings Preview: Q408

Johnson & Johnson [[JNJ]] is scheduled to report fourth quarter 2008 results before the market opens on Tuesday, January 20. Based on our analysis, we at are expecting JNJ to report better than expected results that exceed Wall Street’s expectations.


Analyst Expectations

We are forecasting revenues of $15.82 billion and EPS of $.96. This would represent a 1% decline in revenues from last year’s $15.96 billion in the same period. The current analyst consensus calls for revenues of $15.97 billion and $.92 EPS.


Johnson & Johnson has traditionally enjoyed a reputation as a defensive stock and a company you want to own in almost any economic environment. The company produces a tremendous amount of cash from its diversified product offerings. It has an incredible track record of outperforming Wall Street’s expectations. And maybe most importantly, it manages the company to create long-term value for its shareholders.


We expect that investors will benefit from JNJ’s strong cash position ($14.8 billion) in 2009. The company still has $4.9 billion remaining in their share repurchase plan. In addition, the current dividend yield is over 3% and could be expected to increase.


As with every pharmaceutical firm, the success of their product pipeline is essential to the future success of the company. Many analysts believe that JNJ’s pipeline is the strongest it has been in the last five years. New products are expected to contribute heavily to the company’s sales growth over the next few years.


Share Performance

Johnson & Johnson’s shares are down 19% from their 52-week of $72.76 set in September 2008. In 2008, their shares declined only 10% making them one of the Dow’s best performers.



Shares are now trading at 12.6x consensus 2009 EPS estimates. While little growth is expected in 2009, moving into 2010 and beyond the growth grate should re-accelerate once again. Therefore, we would expect JNJ’s shares to remain relatively range bound this year, but this solid company with its attractive dividend would be a good pick up if shares fall below $50.


Recommendation: Hold with a $60 price target.


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