By Emma Court
When Johnson & Johnson reports third-quarter earnings, scheduled for Tuesday before the bell, investors will be closely watching for any commentary about the impact of three recent U.S. hurricanes.
The hurricanes, which hit largely in September, may have disrupted demand for drugs and other medical products, as well as supply. The devastation wrought by Hurricane Maria in Puerto Rico in particular has sparked concerns about shortages, since many drugmakers and medical device companies have manufacturing presences there.
But that won’t necessarily translate into a weak quarter, said RBC Capital Markets analyst Glenn Novarro: “Our meetings with investors over the past six weeks revealed a high level of confidence in third-quarter results of large-cap MedTech, despite the uncertain financial impact of three highly destructive hurricanes (Harvey, Irma and Maria).”
Johnson & Johnson’s /zigman2/quotes/201724570/composite JNJ +0.74% stock has outperformed the S&P 500 in recent weeks, Novarro said, and he expects a beat-and-raise from the company.
But so far, Johnson & Johnson hasn’t said much about Hurricane Maria’s operational impact, said J.P. Morgan analyst Michael Weinstein, noting the company’s “significant manufacturing presence in Puerto Rico with 7 plants on the island manufacturing everything from Tylenol to Prezista to blood glucose meters and strips.”
And all of the company’s business segments — consumer products, medical devices and pharmaceuticals — have some Puerto Rico manufacturing presence, Weinstein said.
Pharmaceuticals now make up half of the company’s revenue, which has led Johnson & Johnson to be seen as a bellwether for the drug industry.
Hurricane effects might be balanced by a weak dollar, which is expected to aid the company’s sales numbers, said Leerink analyst Geoffrey Porges.
“We believe JNJ will be able to manage through transient near-term Pharma headwinds with its diversified business model and product portfolio,“ said Leerink analyst Danielle Antalffy.
“In our view, JNJ will remain a relatively safe haven in a volatile market as investors and companies digest the potential impact of a new administration driving political uncertainty both in the U.S. and abroad,” she said.
Here’s what to expect:
Earnings: Analysts expect Johnson & Johnson to report third-quarter earnings of $1.80 per share, up from $1.68 per share in the year-earlier period, according to FactSet. Johnson & Johnson has surpassed the FactSet consensus in every quarter over the last five years.
The software platform Estimize, which crowdsources estimates from buy-side and sell-side analysts, hedge funds, academics and others, has the company earning slightly more, or $1.82 per share.