With dozens of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk decision.
Let's turn to Johnson & Johnson (NYSE:JNJ) . With its 11% gain outpacing the Dow Jones Industrials in 2012, the health care conglomerate hopes that 2013 will mark a new chapter in which it can get past some of the challenges of recent years. Let's take an early look at what's been happening with Johnson & Johnson over the past quarter and what we're likely to see in its quarterly report next Tuesday morning.
Stats on Johnson & Johnson
|Analyst EPS Estimate||$1.17|
|Change From Year-Ago EPS||3.5%|
|Revenue Estimate||$17.67 billion|
|Change From Year-Ago Revenue||8.7%|
|Earnings Beats in Past 4 Quarters||4|
Will Johnson & Johnson move the markets? Projections for J&J's fourth-quarter earnings have stayed quite stable over the past few months, with the consensus earnings-per-share forecast barely budging. That resilience has contributed to strong stock performance, with shares rising about 5% since mid-October.
The big challenge that J&J has faced throughout the past several years has been a surge in product recalls and other negative news. With an average of almost one recall per month in 2012, J&J failed to make much progress on that score last year, and the repeated failures have damaged consumer confidence in the company's products. One thing to look for in this quarter's report is any sign that problems are creeping up among J&J's more consumer-facing segments.
But J&J may be able to gain from the woes of robotic surgical giants MAKO Surgical and Intuitive Surgical, both of which have come under fire as growth in the industry starts to slow. If robotic medical devices become more of a niche market and less a cutting-edge technology, then J&J's more traditional device business may be better able to take advantage.
One question J&J management might get to address this quarter is whether J&J would be better off splitting up. With fellow health-care conglomerate Abbott Laboratories (NYSE:ABT) having spun off its AbbVie proprietary pharmaceutical business into a separately traded entity, some would argue that J&J could benefit from having its pharmaceuticals, medical-device, and consumer products divisions all set free to operate independently.
J&J has every chance to put its best foot forward to start 2013. If it can't reverse some of its more troubling trends, though, 2013 could be another tough year for the health-care giant.