Q3 Preview: Johnson & Johnson (JNJ) Kicks Off Pharma Earnings; May Face Headwinds from FX, Generics

Shares of Johnson & Johnson (NYSE: JNJ) are outperforming the broader stock market Monday heading into its third-quarter results, expected out before the market opens Tuesday. The stock is down about 1.1 percent, better than a 1.5 percent decline in the S&P 500 this afternoon.

The Street is currently looking for Johnson & Johnson to report earnings of $1.21 on revenue of $16.02 billion. Such earnings would be a 5.5 percent dip from last quarter and 1.6 percent slide from the same period last year.

The stock is up 5.9 percent during 2011. Johnson & Johnson has traded in a range of $57.50 to $68.05 over the last 52-week time frame.

Johnson & Johnson is going for 12.2x forward earnings, compared with 10.4x for Covidien (NYSE: COV), and 10.4x for Abbott Labs (NYSE: ABT).

Data from Bloomberg has 14 analysts with a Buy rating on Johnson & Johnson, 14 at Hold, and none at Sell. The price target average on Johnson & Johnson is $70.50, with a low of $64 and high of $90.

Analyst Comments

• Goldman Sachs sees earnings of $1.20. Goldman said the focus will be on "the MD&D business and any change related to utilization trends, which have remained weak but stable. We also expect management to provide an update on the Synthes deal in terms of timing of closure, potential FTC issues, and potential for an update on 2012 merger guidance. Our recent visit with management suggested potential for upside to the guidance of slight dilution in 2012. In addition, we expect management to provide an update on the Consumer business (timing of products coming back to the market), as well as recent new product launches, such as Zytiga and Incivo. While we continue to expect operational EPS to show acceleration in 2012/2013 from each of its core businesses rebounding."
  
  
• Leerink Swann expects earnings of $1.16 per share in the quarter. Leerink comments, "recent new Pharma product launches and the gradual return to market of previously-recalled McNeil/OTC products should help JNJ offset ongoing negative growth headwinds to drive mid-single-digit organic sales growth---up from low-single-digits in 2Q11."
  
  The firm also said, "our below-consensus EPS estimate primarily reflects our opinion that meaningful margin expansion will be more backend loaded, as JNJ continues to absorb company-specific growth headwinds such as the McNeil Consent Decree and recent generic Pharma competition, as well as broader industry growth headwinds such as an increasingly tough pricing environment, still-weak procedure volumes, and healthcare reform."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Johnson & Johnson's past performance at Streetinsider's Johnson & Johnson Income Statement.

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