North America

Earnings Preview: Johnson & Johnson Q4 2016 (JNJ)

By: Craig Bowles


Johnson & Johnson (JNJ) is slated to report 4Q 2016 earnings before the opening bell on Tuesday, January 24th. The earnings release is expected at approximately 7:45 a.m. ET with a conference call to follow at 8:30 a.m. that is webcast through J&J investor relations. A member of the Dow Jones Industrial Average, J&J has significant market influence and the potential to impact the broader market gauges.


Outliers & Strategy

Key measures:

  • Adjusted Earnings Per Share (EPS) & Earnings Per Share (EPS) Excluding Items: The values for both measures are typically the same and are comparable to consensus estimates. The Street estimate is $1.56 (range $1.54 to $1.62). (Source: Yahoo! Finance)
  • Revenues: Analyst consensus expectations are to increase 2.5% y/y to $18.26 bln (range $17.75 bln to $18.56 bln).

Adjusted Earnings Per Share (EPS) Guidance / Revenue Guidance (FY2017).

  • 2017 full-year earnings guidance: The Street estimate is $7.13 (range $7.00 to $7.29).
  • 2017 full-year revenue guidance: The Street estimate is $75.13 bln (range $73.46 bln to $76.81 bln).
  • J&J P/E of 20.2 compares to a 5-year average of 19.8; P/B of 4.3 compares to a 5-year average of 3.7; P/S of 4.5 compares to a 5-year average of 3.8; P/CF of 19.0 compares to a 5-year average of 16.4. Dividend 2.7% compares to a 5-year average of 2.9%.
  • Analysts view J&J with 8 Buy, 11 Hold, and 1 Sell rating. (source:
  • J&J is the first of the major pharmaceutical companies to report quarterly results and could impact the likes of Pfizer (PFE), Merck (MRK), Abbott Labs (ABT), and Bristol Myers Squibb (BMY).
  • J&J shares tend to see minimal movement off earnings, with the 1-day average price change on earnings of just 1.82%. Options are pricing in an implied move of 1.83% off earnings.

Recent News

  • 01/11: Johnson & Johnson has tentatively agreed with Actelion (ALIOY) on a price and talks are now focused on valuing what would be a new unit that would house the research and development assets, according to a post on
  • 01/10: J&J CEO Alex Gorsky suggested that tax reform and repatriation could be a major game changer for the company, according to a post on
  • 12/22: Johnson & Johnson and Actelion confirmed they are back in discussions regarding a potential strategic deal which Wells Fargo Securities values at potentially a $32 billion transaction, according to a post on Barron’
  • 12/10: Johnson & Johnson shares could rally about 20% as operating improvements spur earnings growth and deserves more respect from Wall Street, according to a post on Barron’

Technical Review

Johnson and Johnson made an all-time high in July at $126.07 before pulling back and has traded around the 200-day moving average since. Point and figure technicians have a bearish price objective of $99. The healthcare sector peaked on August 1st, 2016 and two-year smoothed growth rates have been slowing since March 2015 when the sector was the strongest with growth rates over 100. Historically, a sector would be expected to underperform through the next expansion after reaching such a high growth rate. (Chart courtesy of



While Pfizer and Merck have restructured and narrowed their focus, Johnson & Johnson is nearing a conglomerate status full of consumer products, drugs and medical devices. J&J has $40 bln in cash but that could change dramatically with a $28-32 billion Actelion purchase. The company has beaten estimates by an average of 5c the last four quarters with mostly positive market reactions. Estimize consensus for an adjusted EPS of $1.58 on revenue of $18.226 bln compares to analyst consensus of $1.56 on revenue of $18.26 bln. Our first look at 2017 guidance will be of interest.


DISCLAIMER:  By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.