* Reports Q2 2019 results on Tuesday, July 16, before the market is open
* Revenue Expectation: $ 20.29 billion
* EPS Expectation: $ 2.44
For Johnson & Johnson (NYSE 🙂 investors, no news is good news until the world's largest producer of both consumer and healthcare products finds a way to settle thousands of lawsuits alleging that its talcum powder has caused ovarian cancer.
There are so many of these cases – 14,000 according to media estimates – that the problem threatens huge financial and reputation risks for the multinational pharmaceutical company. The stock fell by more than 4% on Friday after reports from the US Department of Justice investigated whether the company had withheld the potential cancer risk of its talcum powder to the public
The criminal probe coincides with a legal investigation and civil claims from thousands of cancer patients that J & J & # 39; s talcum powder Talk was responsible for their illness. Now, a large Washington jury is examining documents that may help shed light on what company officials may have known about carcinogens in its products, according to a Bloomberg report referring to unnamed sources.
These developments and ongoing disputes in multiple jurisdictions have put pressure on JNJ shares since December last year, despite positive news about the outcome. The price of J & J is trading at $ 134.29 at the end of Friday, but this year is only 5.5% lower than the price, which rose more than 20% over the same period.
For the period ending June 30, the company is expected to earn $ 2.44 a share on the sale of $ 20.9 billion, according to the consensus estimate of analysts. Although baby powder is only a small part of J & J's annual turnover, it has been a core brand for the company for more than a century – and also a major obstacle to the company's financial health, amid uncertainty about the amount that it may be must reserve for extrajudicial settlements.
The company said it has reserved money for court fees in connection with claims claims, but has not specified the amount. According to Bloomberg, civil settlements J & J estimate as much as 15 billion dollars in total. However, the company claims that it is not liable because its products are safe.
J&J profit strength
J & J keeps court cases aside, and has consistently proven that its product portfolio is strong enough to generate substantial cash flows for investors. In the first quarter, the company's fast-growing pharmaceutical unit was the key to compensating for weaker consumer and medical device lines.
J & J & # 39; s drug company is now the largest of the company's three main segments, with sales in the first quarter of 4.1% to $ 10.2 billion, aided by Psoriasis drug Stelara, whose sales increased by 32% to 1.4 billion dollars
Another bright spot was the launch of the nasal spray Spravato, a close chemical cousin of the anesthetic ketamine that works quickly to relieve symptoms of depression. The rollout is "for a very, very strong start," Jennifer Taubert, head of the pharmaceutical unit of the group, told investors at a conference call.
Bottom Line
J&J supplies can remain under pressure for some time and it is difficult to see that it is quickly reaching a bottom. At the same time, we continue to believe that the company has the means to combat these claims, thanks to the broad canal and the enormous opportunities for cash generation. But the question is: when should investors focus on the company's core profit and start ignoring process-related risks?
In our opinion, it all depends on how consistent J & J is performing in terms of revenue and whether it shows that its future prospects are improving. The Q2 win report that will be released tomorrow should provide some clarity.
