Johnson & Johnson (JNJ - Get Report) 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.