Earnings Preview: Johnson & Johnson

Johnson & Johnson ( JNJ - Analyst Report ) is slated to report its third quarter 2012 earnings on October 16, 2012 before the opening bell. The current Zacks Consensus Estimate for the second quarter is $1.20 per share, representing a year-over-year decline of 3.0%. Third quarter revenues are expected to come in at $16.9 billion, representing year-over-year growth of 5.3%. Full year earnings are expected to be $5.06 per share, up 1.2%.

Johnson & Johnson has surpassed earnings estimates in each of the last four quarters with a trailing four-quarter average of 1.68%. Third quarter earnings could exceed estimates by 1.67%.

Second Quarter Recap

Johnson & Johnson posted second quarter 2012 earnings (excluding special items) of $1.30 per share, a penny above the Zacks Consensus Estimate and 1.6% above the year-ago earnings of $1.28 per share. Results were impacted by negative currency fluctuation.

Revenue declined 0.7% year-over-year to $16.5 billion. Revenues were just shy of the Zacks Consensus Estimate of $16.7 billion. While operational factors favorably impacted sales by 3.5%, currency fluctuations had a negative impact of 4.2%. Results included the impact of the recently completed Synthes acquisition, which contributed 1.2% to global operational sales growth

Including one-time items, Johnson & Johnson reported second quarter earnings of 50 cents per share, 50.0% below the year-ago earnings of $1.00.

Agreement of Analysts

Estimate revisions for Johnson & Johnson for the third quarter and full year 2012 are mixed. While 2 of the 14 analysts covering the stock have reduced their third quarter estimates in the last 7 days, 3 analysts have reduced their estimates over the last 30 days. There were no movements in the opposite direction. Meanwhile, estimates for the full year have been revised upwards during the last 7 and 30 days by 2 analysts each with no movements in the opposite direction.

Magnitude of Estimate Revisions

The Zacks Consensus Estimate for the third quarter has declined by a penny to $1.20 per share over the last 7 days. Meanwhile, the Zacks Consensus Estimate for 2012 remains unchanged at $5.06 per share. The Zacks Consensus Estimate for 2012 is towards the higher end of the company’s earnings per share guidance range of $5.00 - $5.07.

Neutral on Johnson & Johnson

We currently have a Neutral recommendation on Johnson & Johnson. The stock carries a Zacks #2 Rank (Buy rating) in the short run. Our long-term Neutral recommendation on the stock is based on the belief that Johnson and Johnson’s diversified business model, lack of cyclicality and strong financial position will help it in tough situations. Moreover, Johnson & Johnson has been signing deals, which should help boost its revenues in the long term.

Besides Johnson & Johnson, Forest Labs ( FRX - Analyst Report ) , will also be reporting its financial results (second quarter fiscal 2013) on October 16.