Wednesday, January 23, 2008

Johnson & Johnson (JNJ) - A Sliver of Good News

Well it’s been a pretty dismal couple of weeks for the markets with many companies (particularly financials) releasing earning reports that surprised even the bearish of analysts. However, despite all the doom and gloom there are a few positive results out there.

Yesterday Johnson & Johnson announced record sales of $16 billion (a 16.6% increase from Q4 2006) and a 10.8% increase in fourth quarter EPS. Excluding special items their fourth quarter EPS was $0.88 beating the analyst consensus of $0.86 a share. Although these aren’t blockbuster results they are exactly what I’d expect from JNJ, consistent and steady. Even more importantly I think it’s important to look at where the growth is coming from:

CONSUMER SEGMENT
U.S Sales: Up 37.6% to $1.63 billion from $1.18 billion
International Sales: Up 57.9% to $2.18 billion from $1.38 billion
Total Growth: Up 48.5%

(The huge increase in this sector is partially a result of the acquisition of Pfizer’s consumer division.)

PHARMACEUTICAL SEGEMENT
U.S Sales: Up 2% from last year's $3.87 billion
International Sales: Up 17.8% to $2.45 billion from $2.08 billion a year ago
Total Growth: Up 7.5%

MEDICAL DEVICES & DIAGNOSTICS SEGMENT
U.S Sales: 6.8% to $2.66 billion from $2.49 billion
International Sales: Up 15.4% to $3.09 billion from $2.68 billion
Total Growth: Up 11.3%

The results are certainly indicative of where the growth is for JNJ (international) and also one of the reasons I originally initiated a position in JNJ.

The company also gave guidance for 2008 and indicated that their EPS would be in the range of $4.39 - $4.44. This represents an increase of 5.8% to 7% not bad considering it looks like we're heading into a recession.

(Disclaimer: I currently have a position in JNJ but am not a financial advisor. Please do your own research and make your opinions on when to buy or sell. Nothing I say should be bastardized or construed in any way to be advice)

25 comments:

MG said...

Good post. It lends credence to the notion about JNJ being less economically sensitive.

Thicken My Wallet said...

I wonder if JnJ is still too expensive though. I love the stock but can't get my mind around buying it if earnings growth is in 10-12% range but p/e is in the high teens/low 20's.

Anonymous said...

JNJ PE is lowest it has been in years. With the current market fear, things are coming to their buy range.

Today JNJ went down to 62.00. I would have bought but I had already loaded up at 60.00 (It makes up 55% of my portfolio).

If it goes down 20% from my buyprice, I'll load up some more.

IMO if you haven't bought it and it goes down to 60.00, you should buy.

Uncle Pickles said...

JNJ is stuck in the mud. There's two major drugs off patent this year and medical devices is stagnant. The shining star is consumer products. Since JNJ is FCF machine, it should turn a low double digit EPS gain because of share buybacks and Fx gains. Same outlook for 09. Look for the good ol'days in 2010. This game is about patience and the 10% dividend increase that will come in April. One day Mr. Market will recognize JNJ and we will rewarded.

MG said...

JNJ really is the type of stock that you just buy and put away forever. There are so many good things going for this company long term and it has such solid past.

anon - I think you have a typo here unless you have 55% in JNJ, which I really doubt but hey this might just be one stock that you could pull that off with!

Anonymous said...

MG,

Not a typo. It IS 55%. I don't belive in (too) much diverisfication.

My plan is to hold btn 5 - 10 great, dividend growing, non-cyclical business that I keep adding onto (and of course never sale). I have waited for JNJ to become cheap and for me self to accumulate enough cash for years. Finally I am in a position to initate positions that matter.

Coincidentally the markets are providing bargains just when I am ready with me arsenal.

I also have a (very)small portfolio for buy and sell investing (trading) in good companies - Retailers, etc

Sample: bought WMT @ 43 will probably sell in the 51-52 range. Will buy home depot when it gets a little cheaper (@ 20). Both of these are good companies and cheap. But I just can't stand retailers for long term holdings. One bargain missed in retailers was AEO. Kinda small cap for me, but was extremely cheap at 18-19 its around 22. Guess can't win 'em all - wasn't sure about pulling the trigger as it goes outside my investing rules.

Got kinda long winded. Sorry about that.

BTW: Love your blog.

Middle Class Millionaire said...

anonymous,

Just out of curiousity what are the 5 to 10 stocks that you're building your portfolio around?

Anonymous said...

Middle Class Millionaire,

Top Tier:

JNJ,MO,PEP,KO,PG,GE,BUD,RY,MFC,CDL.A,KMB,UL,GE,ETC

2ND Tier:
WMT,HD,REI.UN,FTS,ENB,and other utilities and O&G companies (like XOM,COP,ENC)

Top Tier is the foundation on which my portfolio is built. Notice the theme: ALL BRAND NAMES. As of yet I own JNJ and MO from those. Some in there are cheap but not quite. I love extremely cheap stocks cause when I buy I don't nibble, I put the complete allocated amount. I don't care if it gets cheaper by less than 20% but if it gets cheaper by 20%+ than I purchase more.

2nd Tier great brand names but ones that I would not hold for life. I purchase when they are cheap and sell when fully valued or close to.

I know that Wal Mart is still cheap at 50 (I sold today at), but I know that it will come down again. Maybe not to 43 (my original purcahse price) but somewhere in the 46-48 range.

I feel there is still a lot of volatility left in the market.

Dividends4Life said...

This has been the closest I have got to buying JNJ. Unfortunately, I need it to fall a little bit more to make the numbers work.

Great post! I plan to include your article in my weekly carnival review this Friday.

Best Wishes,
D4L

QUALITY STOCKS UNDER 5 DOLLARS said...

Interesting post on johnson and johmson.

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