Johnson & Johnson (JNJ) reports its FQ2 ’15 results before the market opens tomorrow and both Estimize and Wall Street are predicting a quarter-on-quarter (QoQ) uplift in EPS and revenues. Despite the positive outlook for this quarter’s result, Johnson & Johnson’s stock year-to-date (YTD) has not performed well falling 4.42% relative to the S&P 500 index which has appreciated 1.71%.
Johnson & Johnson researches and develops, manufacturers, and sells a wide range of products in the healthcare industry globally. The company operates under three different fields: Consumer, Pharmaceutical, and Medical Devices.
Estimize and Wall Street predict an EPS figure of $1.72. The Estimize community, however, is looking for a slightly lower revenue figure of $17.640B compared to Wall Street’s forecast of $17.652.In the previous quarter, Johnson & Johnson reported a third consecutive fall in revenues QoQ. In addition to falling revenues, Johnson & Johnson has reported volatile EPS figures over the past twenty-four months causing the share price to fluctuate quite substantially.
Despite the falling revenues and volatility, Johnson & Johnson still maintains many solid fundamentals. In particular, the stock is trading at an attractive multiple of 17.79X earnings (TTM) and pays an attractive dividend yield of 2.85%. In addition, Johnson & Johnson’s profit margins are increasing and its return on equity is above the industry average.
Although Johnson & Johnson has lagged both the index and the healthcare industry year-to-date, the stock price has very recently experienced a bounce leading into its result. Last week, Johnson & Johnson announced to the market that a recent self-funded study indicates that its experimental psoriasis medicine works better than the key rival drug. The drug being tested is known as “Guselkumab” and is currently in the final stage of patent testing. If approved, Johnson & Johnson will be competing in a market in which tens of billions of sales are shared among a handful of different biotech and pharmaceutical companies.
The result tomorrow will be important. Investors are hoping for a positive reversal in revenues and a strong EPS number. If achieved, Johnson & Johnson may rebound and begin to move upwards again. However, if the results disappoint, the share price may continue in its downward trend.