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Earnings Preview: Johnson & Johnson

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Johnson & Johnson (JNJ - Free Report) is slated to report its fourth quarter and full year 2011 earnings on January 24, 2012 before the opening bell. The current Zacks Consensus Estimate for the fourth quarter is $1.10 per share, representing a year-over-year increase of 6.36%. Full year earnings are expected to be $4.97 per share, up 4.4%.

Johnson & Johnson has surpassed earnings estimates in three of the last four quarters and reported in line with the Zacks Consensus Estimate in the final quarter of 2010 (with a trailing four-quarter average of 4.57%).

Third Quarter Recap

Johnson & Johnson posted third-quarter 2011 earnings (excluding special items) of $1.24 per share, three cents above the Zacks Consensus Estimate of $1.21 and 0.8% above the year-ago earnings of $1.23. Revenues for the reported quarter increased 6.8% year-over-year to $16 billion. Revenues were in-line with the Zacks Consensus Estimate.

Operational factors and foreign exchange movement favorably impacted sales by 2.6% and 4.2%, respectively.

(Read our full coverage of the third quarter 2011 earnings report at J&J Beats, Adjusts Outlook).

Agreement of Analysts

There is a significant negative bias in estimate revisions for Johnson & Johnson for the fourth quarter as well as fiscal 2011. Fourth quarter estimates have been revised downward over the last 7 and 30 days by 3 analysts each with no corresponding upward movements.

Full year 2011 estimates too have a downward bias, with 3 of the 24 analysts following the stock slashing estimates over the past 7 and 30 days. No upward movement has been witnessed.

The downward revisions mainly reflect the impact of foreign exchange headwinds and manufacturing issues.

Magnitude of Estimate Revisions

There is a negligible change in estimates for the fourth quarter and full year 2011 in the last 7 and 30 days. The Zacks Consensus 2011 Estimate of $4.97 is within the guidance range provided by the company. Johnson & Johnson expects 2011 earnings in the range of $4.95 - $5.00 per share. 

Neutral on Johnson & Johnson

We currently have a Neutral recommendation on Johnson & Johnson. The stock carries a Zacks #4 Rank (Sell recommendation) 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.

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