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J&J (JNJ) to Get the Ball Rolling for Pharma Q4 Earnings

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Zacks Equity Research
·5 min read
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Johnson & Johnson JNJ will report fourth-quarter and full-year 2020 results on Jan 26, before market open. In the last reported quarter, the company delivered an earnings surprise of 10.55%.

The healthcare bellwether’s performance has been pretty impressive, with the company exceeding earnings expectations in each of the trailing four quarters. The company has a four-quarter earnings surprise of 9.07%, on average.

Johnson & Johnson Price and EPS Surprise

Johnson & Johnson Price and EPS Surprise
Johnson & Johnson Price and EPS Surprise







Johnson & Johnson price-eps-surprise | Johnson & Johnson Quote

J&J’s stock has risen 9.3% in the past year compared with an increase of 6.1% for the industry.


Factors to Consider

J&J’s Pharma segment is expected to have continued to outperform the market led by increased penetration and new indications across key products such as Darzalex, Imbruvica, Stelara and Erleada. Improved trends in prescription volumes and physician office visits may have aided sales in the fourth quarter. However, the impact of rising cases of COVID-19 infections on new patient starts of some physician-administered drugs needs to be seen. J&J markets Imbruvica in partnership with AbbVie ABBV.

The Zacks Consensus Estimate for Imbruvica, Darzalex and Stelara is pegged at $1.08 billion, $1.16 billion and $2.0 billion, respectively.

Importantly, sales of key new drug, Tremfya declined sequentially in the third quarter due to the negative impact of COVID-19 and investments in rebates offered to enhance access. It remains to be seen if sales trends improved in the fourth quarter.

Moreover, sales of some other key drugs like Xarelto and Invokana/Invokamet improved in the third quarter after declining in the past few quarters. It remains to be seen if the positive trend continued in the fourth quarter. Generic/biosimilar competition to drugs like Zytiga and Remicade is likely to have hurt the top-line.

The Zacks Consensus Estimate for the Pharmaceutical segment is $11.6 billion.

As far as the Medical Devices segment is concerned, the pandemic hit this segment the hardest due to a widespread decline in elective surgical procedures. However, in the third quarter, the segment benefited from better-than-expected market recovery amid faster-than-expected ramping up of medical procedures. In the fourth quarter, J&J expects continued procedure stabilization in the Medical Devices unit. Fourth-quarter sales are expected to be flat to down 10% in the Medical Devices unit. The potential impact of rising cases of infection on the segment remains to be seen.

The Zacks Consensus Estimate for Medical Devices segment is $6.68 billion.

In the Consumer Healthcare segment, higher sales of OTC products, oral care products and digestive health products are likely to have been offset by the negative impact of the COVID-19 pandemic on certain categories like skin health/beauty.

The Zacks Consensus Estimate for Consumer Healthcare segment is $3.67 billion

Importantly, investors will also focus on whether J&J provides its financial outlook for 2021.

Key Recent Development

Last month, J&J announced that its ENSEMBLE phase III study on its single-dose COVID-19 vaccine candidate, JNJ-78436735, is now fully enrolled with approximately 45,000 participants. J&J had earlier said it will enroll 60,000 participants globally. However, it clarified that 45,000 participants will be sufficient to generate the data needed to determine the efficacy and safety of the candidate. J&J expects to report interim efficacy data from the ENSEMBLE study by end of January 2021. If the data are positive, J&J will file an application for EUA from the FDA in February. An update is expected on the investor call.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for J&J this time around. The combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP: J&J’s Earnings ESP is -2.53% as the Zacks Consensus Estimate is pegged at $1.81 and the Most Accurate Estimate is lower at $1.76. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: J&J has a Zacks Rank #3.

Stocks to Consider

Here are some large drug stocks that have the right combination of elements to beat on earnings this time around:

Glaxo GSK with an Earnings ESP of +10.15% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

 Eli Lilly LLY has an Earnings ESP of +2.35% and a Zacks Rank #3.

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