Will JNJ Miss on Earnings?

Zacks

Johnson & Johnson (JNJ) is scheduled to report its first quarter 2013 results on Apr 16, 2013 before the opening bell.

Last quarter, the company posted a 1.71% positive surprise. Let’s see how things are shaping up prior to the announcement.

Factors at Play for 1Q

Last quarter, Johnson & Johnson recorded growth on the back of strong product sales despite the negative impact of currency fluctuation. Even though we expect the company to continue facing headwinds in the form of pricing pressure, manufacturing issues and US healthcare reform, we believe Johnson & Johnson’s diversified business model, lack of cyclicality, and strong financial position will continue to help the company pave its way through difficult situations.

Earnings Whispers?

Our proven model does not conclusively show that Johnson & Johnson is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.39 while the Zacks Consensus Estimate is higher at $1.41. That is a difference of -1.42%.

Zacks Rank #3 (Hold): Johnson & Johnson’s Zacks Rank #3 lowers the predictive power of ESP because the Zacks #3 Rank when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Eli Lilly and Company (LLY), Earnings ESP of 6.73% and Zacks Rank #3 (Hold)

Onyx Pharma Inc. (ONXX), Earnings ESP of 3.39% and Zacks Rank #3 (Hold)

GileadSciences (GILD), Earnings ESP of 2.08% and Zacks Rank #2 (Buy)

Read the Full Research Report on ONXX

Read the Full Research Report on LLY

Read the Full Research Report on GILD

Read the Full Research Report on JNJ

Zacks Investment Research



More From Zacks.com

Rates

View Comments (0)

Recommended for You