Johnson & Johnson (JNJ) continues to be misunderstood. Even so, its stock continues to perform adequately despite execution problems including product recalls. What has hurt JNJ of late is that it is perceived "too big to succeed."
Its insistence on remaining one entity has hurt it. It would have seen positive results if it had opted to separate its businesses. JNJ has yet to prove that it can make a solid turnaround as long as it remains (in my opinion) too big and lacking in agility.
The company plans to report third-quarter earnings on Tuesday, and analysts are looking for net income of $1.21 per share, representing a decline of 2.4% from the same period one year ago. In its second quarter, however, profits fell almost 50% to $1.41 billion from the $2.78 billion that it reported a year ago. As a result, the Street has grown more pessimistic about the company's prospects, and I think investors should as well.The fact that the stock is yet near its 52-week high is impressive and suggests that the company still has a good reputation in some quarters. Nonetheless, analysts at Goldman Sachs have issued a sell rating on the stock even though they also set a price target of $72, which is higher than where the stock currently trades. I'm not bullish JNJ at this point, but its track record of solid performances suggests that it deserves time to be proven right. For now it's a hold.
Bottom LineEarnings season can be both an exciting time as well as one that brings a lot of anxiety for companies and investors. It's called the reporting period for more than one reason as companies are essentially sharing their quarterly report cards -- where getting a passing or failing grade often depends on the expectations that were set. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage. Follow @rsaintvilus At the time of publication, Saintvilus held no positions in stocks mentioned.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV