Why Johnson & Johnson Will Move the Dow Tomorrow

The health care giant is among the first Dow components to report their second-quarter earnings tomorrow.

Jul 14, 2014 at 12:00PM
Longview

On Monday, the Dow Jones Industrials (DJINDICES:^DJI) managed to climb back above the 17,000 level, rising by triple digits right out of the gate and holding on to gains of 130 points as of 11:45 a.m. EDT. Earnings season kicks into high gear this week, and much of today's rise came in the wake of better-than-expected performance from a former Dow component bank. Yet even though financial companies will play a big role in the Dow's earnings this week, Johnson & Johnson (NYSE:JNJ) is also set to play a pivotal role in setting the tone of the new earnings season.

Jnj
Source: Johnson & Johnson.

Johnson & Johnson will issue its earnings release tomorrow morning, with its most recent quarterly report coming out at around 7:45 a.m. EDT. After that, the Dow component company will have its earnings meeting and conference call at 8:30 a.m. EDT to discuss the results, with a live webcast available at Johnson & Johnson's investor-relations website.

Investors are enthusiastic about Johnson & Johnson's earnings prospects, as the stock has risen to all-time highs. Expected growth of around 5.5% in revenue and 4% in earnings per share might seem somewhat modest for a stock hitting new record levels, but unlike many of its peers among the Dow Jones Industrials, Johnson & Johnson has convinced investors that it has some strong growth prospects that could accelerate in the future.

Jnj Bandaid Embedded

Specifically, Johnson & Johnson has banked on the continuing success of its pharmaceutical division in order to drive gains for the future. In recent quarters, most or all of Johnson & Johnson's overall growth has come from its pharma segment, with much more sluggish performance and even outright declines in some cases for its medical-device and consumer goods businesses. For its part, Johnson & Johnson still sees some opportunities for better results in those two lagging divisions, but the company has taken a more measured approach in focusing on efforts with the highest chance of reaching favorable outcomes, rather than simply aiming to grow those businesses more broadly. Steps like the completion of its $4 billion sale of its Ortho-Clinical Diagnostics business to Carlyle Group point to J&J's overall strategy of focusing on its best prospects.

Investors will want to see that pharma can sustain the pace of its growth. Last quarter, Johnson & Johnson saw impressive results up and down its sales lists, with treatments like psoriasis drug Stelara and prostate-cancer fighter Zytiga seeing revenue soar. More well-established products like its Remicade arthritis drug didn't see such huge percentage gains, but they nevertheless contributed to overall growth for the company. As Remicade approaches patent expiration beginning next year in Europe, Johnson & Johnson investors will increasingly look at the company's pipeline to make sure that it can replace revenue losses from patent-cliff issues.

Johnson & Johnson's results will move the Dow tomorrow, and the entire pharmaceutical sector will be watching to see if the company can sustain the pace of its recent growth. Good news from Johnson & Johnson could send its fellow drug stocks within the Dow Jones Industrials and beyond higher, and that in turn could spur on the Dow's bull run.

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers