J&J (JNJ) May Beat Q2 Earnings: Will The Stock Gain?
Zacks Investment Research | Jul 15, 2016 08:52AM ET
Johnson & Johnson (NYSE:JNJ) , a bellwether in the health care sector, will be reporting second quarter results on Jul 19, before the opening bell.
The company’s track record is pretty good with J&J beating earnings estimates in the last four quarters with an average earnings surprise of 2.13%.
Let’s take a look at how things are shaping up for the second quarter of the year.
Will the Pharma Segment Drive Results Again?
J&J’s pharma segment, which performed well in the first quarter, should continue performing well on the back of products like Stelara, Imbruvica, Xarelto, Simponi and Invega Sustenna.
Imbruvica’s label was expanded in early March for the first-line treatment of patients suffering from chronic lymphocytic leukemia. This has expanded the patient population significantly.
Meanwhile, robust market growth and increased penetration with the psoriatic arthritis indication should boost Stelara sales. Investors will also be focused on the performance of the company’s new cancer treatment, Darzalex, which is already off to a good start.
However, Olysio sales will keep declining due to additional competition while Invega will be impacted by generic competition. Moreover, sales of the company’s SGLT2 inhibitor, Invokana/Invokamet, could be affected by the addition of warnings regarding the increased risk of bone fractures, competition and formulary status. Zytiga is also facing increased competition.
J&J continues to assume no biosimilar competition for Procrit or Remicade in the U.S. even though the FDA recently approved a Remicade biosimilar (Inflectra). J&J also does not expect generic competition this year for Zytiga, Risperdal Consta, and Invega Sustenna.
The Medical Device business has also been under pressure with several markets in this segment facing challenges in the form of austerity measures, pricing pressure and a slowdown in elective surgeries, which have all contributed to more tempered growth rates. Soft global market conditions and pricing challenges will continue impacting the performance of this business.
Meanwhile, the consumer business is slowly recovering from the impact of the manufacturing issues that had affected this segment.
The company’s M&A strategy will be a key focus area on the second quarter call. J&J’s share buyback program (worth up to $10 billion) should also boost the bottom-line.
Currency and devaluation in Venezuela will remain headwinds. There will also be some working down of inventory in China where the slowdown in the economy had led to high distributor inventory levels.
What Our Model Indicates
Our proven model shows that J&J is likely to beat estimates this quarter because it has the right combination of two key ingredients.
Get The News You Want
Positive Zacks ESP: Earnings Surprise Prediction or Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.