(JNJ) Johnson & Johnson 2011 Third Quarter Earnings Scorecard

Following the release of third quarter 2011 results, majority of the analysts covering Johnson & Johnson (JNJ) revised their earnings estimates. While 2011 estimates have been revised in both directions, 2012 estimates have gone predominantly downwards.

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.

Johnson & Johnson’s 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. Including one-time items, Johnson & Johnson reported earnings of $1.15, 6.5% below the year-ago earnings of $1.23.

Agreement of Analysts

Estimates for fiscal 2011 indicate a somewhat mixed reaction to third quarter results. Out of 22 analysts covering the stock, 9 have raised their estimates over the last 30 days with 7 moving in the opposite direction.

For fiscal 2012, estimates are negatively inclined with 14 analysts (out of 22) making downward revisions over the last 30 days while 1 has increased the forecast. Foreign exchange is unlikely to benefit 2012 earnings significantly.

Magnitude – Consensus Estimate Trend

In view of the significant estimate revisions for 2011 in both directions (over the last 30 days), the earnings estimate has remained static as movements in both directions have balanced out each other. The significant downward bias in 2012 earnings estimates has resulted in the estimate being trimmed by $0.05 over the last 30 days. The current Zacks Consensus Estimates for 2011 and 2012 are $4.97 and $5.24, respectively.

Neutral on Johnson & Johnson

We currently have a Neutral recommendation on Johnson & Johnson. The stock carries a Zacks #3 Rank (Hold rating) in the short run. Even though Johnson & Johnson has been facing challenges in the form of OTC product recalls, pricing austerity in the EU and generic competition, we believe that the company’s diversified business model, lack of cyclicality and strong financial position should help in tough situations.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/

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