Johnson & Johnson Earnings Preview: Second Quarter 2009

Johnson & Johnson [[JNJ]] is scheduled to report their second quarter 2009 results before the market opens on Tuesday, July 14. Based on our analysis, we at are expecting JNJ to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $15.06 billion and EPS of $1.12. This would represent an 8% decline in revenues from last year’s $16.45 billion in the same period. The current analyst consensus estimates calls for revenues of $14.98 billion and EPS of $1.11.


Johnson & Johnson has a strong track record of consistently outperforming Wall Street’s expectations and we are expecting that trend to continue again this quarter. While the effects of the global recession will weigh on the company’s top line performance, the pharmaceutical giant continues to rake in billions in earnings each quarter.


The company’s recent Pharmaceutical Analyst day only seemed to further reinforce the company’s positive future. JNJ’s pharmaceutical pipeline appears ready to re-accelerate sales growth over the next several years. With an attractive 3.5% dividend yield and bright growth prospects, we view Johnson & Johnson to be one of the safest Dow stocks.


Share Performance

Since the beginning of the year, Johnson & Johnson’s shares are down 6. In 2008, JNJ’s shares fell only 10% and easily outperformed the 34% decline in the Dow Jones industrial average.



Shares are now trading at 11.5x consensus fiscal 2010 EPS estimates. This is slightly above the relative valuations of their peer group. We feel that JNJ remains attractive at current valuation levels with limited downside and the potential for accelerating growth in 2010 and beyond.


Recommendation: Buy with a $60 price target.


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