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What's Ahead for Johnson & Johnson (JNJ) in Q4 Earnings?
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Johnson & Johnson (JNJ - Free Report) , the bellwether of healthcare companies, is scheduled to report fourth-quarter 2016 and full-year results on Jan 24, before the opening bell. Last quarter, the company reported a positive earnings surprise of 1.82%.
J&J’s share price was up 17.9% in the past one year, despite challenging conditions in the pharma sector owing to constant media and political focus on drug pricing issues. Its robust performance was primarily backed by consistently strong earnings results as well as regular positive news flow and regulatory updates. Its share price movement also outshines the 1.0% increase witnessed by the Zacks classified Large-Cap Pharma industry.
J&J has consistently surpassed earnings expectations. The company’s earnings beat expectations in each of the last four quarters, with an average positive surprise of 2.47%.
Will J&J be able to beat estimates this time as well?
Let's see how things are shaping up for this announcement.
Will the Pharma Segment Continue to Drive Results?
The Pharmaceutical segment has been performing well and should continue to do so in the to-be-reported quarter on the back of strong sales of new launches and core growth products.
New products like Imbruvica, Xarelto and Darzalex are performing impressively. Robust patient uptake in new indications, product approvals and demonstrated efficacy is propelling sales of Imbruvica. While Xarelto continues to gain market share and broader reimbursement, Darzalex is gaining acceptance as a treatment of multiple myeloma. Other drugs like Stelara, Invega Sustenna, Remicade and Simponi should also contribute meaningfully to the top line.
However, hepatitis C virus (HCV) treatment Olysio’s sales will keep declining due to increased competition, while Invega continues to face a sales decline due to generic competition. Though Invokana/Invokamet sales were down in the third quarter, the drug is expected to return to growth backed by its strong access position across U.S. commercial plans and Medicare Part D, and the Sep 2016 approval of Invokamet XR. Meanwhile, label expansion for products like Stelara and Darzalex should drive their sales.
J&J continues to expect no biosimilar competition for Procrit. The company also does not expect generic competition for Zytiga, Risperdal Consta, and Invega Sustenna to impact 2016 results. Meanwhile, Pfizer, Inc. (PFE - Free Report) launched its biosimilar version of Remicade in late Nov 2016. We believe that though the rate of penetration of a biosimilar entrant may be modest, its launch will remain a source of concern, clouding the prospects of the Pharma segment in 2017.
The Medical Device business will continue to be affected by weak global market conditions and pricing challenges. The company is working on driving growth in this segment through new product launches and by transforming its commercial models.
Meanwhile, dismal market growth is hurting sales in the Consumer business.
Earnings Whispers
Our proven model does not conclusively show that J&J is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Most Accurate estimate stands at $1.54 while the Zacks Consensus Estimate is pegged higher at $1.56. So, J&J has an Earnings ESP of -1.28%. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.
Zacks Rank: J&J’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.
Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
A couple of stocks in the large cap pharmaceuticals sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Eli Lilly and Company (LLY - Free Report) has an Earnings ESP of +3.06% and a Zacks Rank #3. The company is scheduled to release results on Jan 31.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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What's Ahead for Johnson & Johnson (JNJ) in Q4 Earnings?
Johnson & Johnson (JNJ - Free Report) , the bellwether of healthcare companies, is scheduled to report fourth-quarter 2016 and full-year results on Jan 24, before the opening bell. Last quarter, the company reported a positive earnings surprise of 1.82%.
J&J’s share price was up 17.9% in the past one year, despite challenging conditions in the pharma sector owing to constant media and political focus on drug pricing issues. Its robust performance was primarily backed by consistently strong earnings results as well as regular positive news flow and regulatory updates. Its share price movement also outshines the 1.0% increase witnessed by the Zacks classified Large-Cap Pharma industry.
J&J has consistently surpassed earnings expectations. The company’s earnings beat expectations in each of the last four quarters, with an average positive surprise of 2.47%.
Johnson & Johnson Price and EPS Surprise
Johnson & Johnson Price and EPS Surprise | Johnson & Johnson Quote
Will J&J be able to beat estimates this time as well?
Let's see how things are shaping up for this announcement.
Will the Pharma Segment Continue to Drive Results?
The Pharmaceutical segment has been performing well and should continue to do so in the to-be-reported quarter on the back of strong sales of new launches and core growth products.
New products like Imbruvica, Xarelto and Darzalex are performing impressively. Robust patient uptake in new indications, product approvals and demonstrated efficacy is propelling sales of Imbruvica. While Xarelto continues to gain market share and broader reimbursement, Darzalex is gaining acceptance as a treatment of multiple myeloma. Other drugs like Stelara, Invega Sustenna, Remicade and Simponi should also contribute meaningfully to the top line.
However, hepatitis C virus (HCV) treatment Olysio’s sales will keep declining due to increased competition, while Invega continues to face a sales decline due to generic competition. Though Invokana/Invokamet sales were down in the third quarter, the drug is expected to return to growth backed by its strong access position across U.S. commercial plans and Medicare Part D, and the Sep 2016 approval of Invokamet XR. Meanwhile, label expansion for products like Stelara and Darzalex should drive their sales.
J&J continues to expect no biosimilar competition for Procrit. The company also does not expect generic competition for Zytiga, Risperdal Consta, and Invega Sustenna to impact 2016 results. Meanwhile, Pfizer, Inc. (PFE - Free Report) launched its biosimilar version of Remicade in late Nov 2016. We believe that though the rate of penetration of a biosimilar entrant may be modest, its launch will remain a source of concern, clouding the prospects of the Pharma segment in 2017.
The Medical Device business will continue to be affected by weak global market conditions and pricing challenges. The company is working on driving growth in this segment through new product launches and by transforming its commercial models.
Meanwhile, dismal market growth is hurting sales in the Consumer business.
Earnings Whispers
Our proven model does not conclusively show that J&J is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Most Accurate estimate stands at $1.54 while the Zacks Consensus Estimate is pegged higher at $1.56. So, J&J has an Earnings ESP of -1.28%. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.
Zacks Rank: J&J’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.
Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
A couple of stocks in the large cap pharmaceuticals sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
AbbVie Inc. (ABBV - Free Report) is expected to release results on Jan 27. The company has an Earnings ESP of +0.83% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Eli Lilly and Company (LLY - Free Report) has an Earnings ESP of +3.06% and a Zacks Rank #3. The company is scheduled to release results on Jan 31.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>