Can Johnson & Johnson Shares Rise After First Quarter Results?

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Johnson & Johnson Stock (NYSE: JNJ) is expected to release its first quarter 2021 results on Tuesday, April 20. We expect J&J to report slightly lower revenue and profit than consensus estimates. Pharmaceutical sales will be driven by market share gains for Imbruvica, Darzalex and Stelara, which will more than offset lower sales for Zytiga and Remicade, due to competition from biosimilars. The Medical Devices business was hit last year due to a decrease in procedures, a trend that has reversed in recent quarters. However, segment growth could be affected given the surge in Covid-19 cases from newer variants across the world. We expect the company to navigate well based on these trends in the last quarter. Likewise, the Covid-19 disruptions likely also weighed on the company’s consumer health business.

J&J began deployment of its single-dose Covid-19 vaccine in the United States in early March 2021, and its short-term supply is expected to decline as the company faces manufacturing challenges. That said, the company says it is on track to deliver 100 million doses to the United States government by the end of May. Separately, the European Union’s health agency is investigating reports that a few people have developed severe blood clots after receiving the J & J’s Covid-19 vaccine in the U.S. However, we believe it This is unlikely to have an impact on the eventual deployment of the vaccine, which has recently been approved for use. in the EU Although J&J has focused on its vaccine, there is not much from a share price appreciation standpoint as it is a product for non-profit for the company. Overall, oncology and immunology drugs will, in our view, be the primary growth driver for J&J in the near term. Our analysis on J&J Vaccine Updates provides more details.

While we believe J&J will post first quarter results slightly below street expectations, JNJ stock remains attractive at current levels. Our forecast indicates that J&J’s valuation is around $ 196 per share, which is 22% above the current market price of around $ 160. Our interactive dashboard analysis on Johnson & Johnson Pre-Earnings has additional details.

(1) Expected revenue slightly lower than consensus estimates

Trefis estimates J&J revenue in the first quarter of 2021 to be around $ 21.9 billion, slightly below the consensus estimate of $ 22.0 billion. J&J in 2020 saw a decline in medical device revenue, due to the postponement of elective surgeries given the spread of Covid-19. However, the decline was more than offset by continued growth in pharmaceutical sales driven by its oncology and immunology drugs. The company’s three drugs – Stelara, Imbruvica and Darzalex – generated sales of $ 16 billion in 2020, or one-fifth of the company’s total sales. The pharmaceutical segment will likely remain J & J’s main growth driver in the first quarter. Our dashboard on Johnson & Johnson revenues offers more details on the business segments.

2) EPS likely to be lower than consensus estimates

J & J’s first quarter 2021 adjusted earnings per share (EPS) is expected to be $ 2.28 according to Trefis analysis, 2% below the consensus estimate of $ 2.33. J & J’s adjusted net income of $ 5.0 billion in Q4 2020 reflects a slight 1% year-over-year decline. This can be attributed to a drop of more than 200 basis points in net margins, in part due to increased investment in R&D. However, as the company sees a rebound in sales, margins are expected to improve, supporting overall profit growth in 2021. For the full year 2021, we expect Adjusted EPS will be higher at 9. $ 52 compared to $ 8.03 in 2020.

(3) Stock price estimate 22% higher than the current market price

Through our Johnson & Johnson Assessment, with an EPS estimate of around $ 9.52 and a P / E multiple of around 21x in 2021, that translates to a price of $ 196, which is 22% above the current market price of about $ 160. At current levels of $ 160, JNJ stock is trading at 17x its expected EPS of $ 9.52 in 2021, and the 17x figure compares to the 20x levels seen as recently as at the end of 2020, which implies that there is more room for growth for the JNJ share.

Note: P / E multiples are based on the stock price at the end of the year and the reported (or expected) adjusted profit for the full year

While the JNJ stock may be undervalued, 2020 has created many price discontinuities that can provide some interesting trading opportunities. For example, you’ll be surprised at how counter-intuitive stock valuation is. Johnson & Johnson v Regeneron Pharmaceuticals.

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