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Market Update

Earnings on Tap: Johnson & Johnson

Johnson & Johnson's diverse business segments along with a strong pipeline of new products insulate it from potential patent losses facing the pharmaceuticals industry.

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Johnson & Johnson (JNJ) is set to reveal first-quarter results Tuesday morning ahead of the bell.

Wall Street analysts are expecting earnings to come in at $1.41 per share, compared with $1.37 in the year-ago period. For the fourth quarter of the previous fiscal, the company reported net earnings of $2.6 billion, or $0.91 per diluted share, boosted by higher sales of new drugs, including treatment for psoriasis and hepatitis C. Fourth-quarter sales posted growth of 8% to $17.6 billion compared with the previous year.

Morningstar analyst Damien Conover says the health-care products giant maintains a diverse revenue base, a robust research pipeline, and exceptional cash-flow generation that together create a wide economic moat that should shield Johnson & Johnson from potential patent losses facing the pharmaceuticals industry.

While the company still faces more than $2 billion (3% of sales) in patent exposure through 2013, we project strong growth from the remaining business lines to offset these losses and yield steady growth during the next five years, Conover writes.

The stock has gained a robust 18% on a year-to-date basis and presently trades near Conover's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.