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Results: Johnson & Johnson Exceeded Expectations And The Consensus Has Updated Its Estimates

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Simply Wall St
·4 min read
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Johnson & Johnson (NYSE:JNJ) just released its latest first-quarter results and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$21b, some 6.2% above estimates, and statutory earnings per share (EPS) coming in at US$2.17, 52% ahead of expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Johnson & Johnson

NYSE:JNJ Past and Future Earnings April 18th 2020
NYSE:JNJ Past and Future Earnings April 18th 2020

After the latest results, the consensus from Johnson & Johnson's 17 analysts is for revenues of US$79.2b in 2020, which would reflect a perceptible 4.3% decline in sales compared to the last year of performance. Statutory earnings per share are expected to dip 2.1% to US$6.37 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$79.8b and earnings per share (EPS) of US$6.05 in 2020. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$158, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Johnson & Johnson analyst has a price target of US$180 per share, while the most pessimistic values it at US$133. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 4.3% revenue decline a notable change from historical growth of 3.8% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.3% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Johnson & Johnson is expected to lag the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Johnson & Johnson following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Johnson & Johnson. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Johnson & Johnson analysts - going out to 2024, and you can see them free on our platform here.

Plus, you should also learn about the 3 warning signs we've spotted with Johnson & Johnson .

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.