In the quarter ending March 2009, the company surprised the Wall Street by announcing an EPS of $1.26 per share as compared to the consensus estimate of $1.21. In the quarter ending June 2009, the EPS estimate ranges from a low of $1.08 to a high of $1.14 with a consensus estimate of $1.11. As per my calculations, the company could slightly underperform by reporting EPS lower than the consensus estimate.
In terms of total revenue, Johnson & Johnson'( ) business is relatively equally split between its Pharmaceutical, Medical Devices & Diagnostics and Consumer Health divisions. The company could better exploit the overlap between the different divisions. Johnson & Johnson is experienced in the development and commercialization of biologics including the therapeutic proteins, Procrit and Natrecor, and mAbs, Remicade, golimumab and ustekinumab.
The sharp decline facing the company's key small molecule drugs highlights its exposure to generic erosion. With traditional sources of finance becoming scarcer and the market capitalization of many biotech companies at relative lows, J&J could use this opportunity to gain key IP or strengthen its discovery capabilities.
However, in the quarter ended June 2009, Johnson & Johnson's fast-growing consumer health-care unit was hurt by a pullback in consumer spending and competition from store brands as well as the strong dollar. I am forecasting revenues of $14.8 billion and EPS of $1.10. This would represent an 8.1% decline in revenues from last year’s $16.45 billion in the same period. The global recession has been affecting the company’s top line and bottom line performance.
In an effort to broaden its pipeline, J&J last week agreed to buy an 18% stake in Elan PLC( ) for $1 billion, a deal that would give it access to the Irish biotech's drugs to treat Alzheimer's disease. Meanwhile, J&J's patent dispute with rival Abbott Laboratories ( ) over J&J's arthritis treatment Remicade is expected to drag on.
Currently the stock is trading at $57.08 significantly below the current 52 week high of $72.76. I don’t expect the stock to reach its 52 week high at least till the end of 2010.
