J&J, P&G: Should Investors Still Own These Stocks?

With consumer giants J&J and P&G delivering underwhelming earnings, we ask: Are these stocks still a buy in today's challenging consumer climate?
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NEW YORK (TheStreet) -- With consumer giants J&J (JNJ) - Get Report and P&G (PG) - Get Report both offering nuggets of news that wasn't all pleasing in their latest quarterly reports, some are questioning whether the long-touted benefits of owning these stocks still apply in today's challenging consumer environment.

Year-to-date, P&G stock is down 0.6% and J&J stock is down more than 9%.

For the fourth quarter, Procter & Gamble reported earnings below the consensus estimate. P&G tallied earnings of 71 cents a share vs. the average analyst estimate of 73 cents and year-ago earnings of 80 cents. Net earnings were $2.19 billion compared with $2.47 billion in the same quarter last year.

P&G's fourth-quarter net sales increased 5% to $18.9 billion, as organic sales grew 4%.

P&G now anticipates that fiscal 2011 net sales will rise 2% to 4%, and organic sales will increase 4% to 6%. Diluted net earnings from continuing operations and core earnings are anticipated to be in the range of $3.91 to $4.01 a share, up 11% to 14% and up 7% to 9% respectively.

Looking back at P&G's fourth quarter

RealMoney

contributor and Trinity Asset Management portfolio manager Brian Gilmartin commented in a recent column on

RealMoney

that though the company maintains robust cash flow and free cash-flow generation and recently increased its dividend, "the story currently seems to be heavy investment in marketing and advertising along with pricing pressure to gain and sustain market share, both in developed and emerging markets."

P&G Stock Rating Report (PG) Rating and Financial Analysis

Gilmartin said although the majority, or 60%, of the company's businesses experienced market share gains, "it came at a steep price."

Currently much of the analyst "angst" about P&G has to do with the company's ability to "appropriately and accurately price its brands for both growth and margin sustainability," given that its longer-term growth will be driven by the faster-growing emerging markets vs. the U.S. and other larger free markets," Gilmartin wrote.

As for J&J, Morgan Stanley recently downgraded the stock to equal-weight from overweight on lower pharmaceutical growth and fewer leverage opportunities. Johnson & Johnson has lowered its full-year earnings guidance to $4.65 to $4.75 a share from $4.80 to $4.90 a share -- after reporting second-quarter earnings that beat expectations -- to reflect its massive over-the-counter drug recalls this year, the suspension of its McNeil Consumer Healthcare manufacturing facility in Fort Washington, Pa., and unfavorable changes in foreign currency exchange rates.

Analysts were anticipating full-year earnings of $4.81 on revenue of $63.24 billion.

For the second quarter, J&J reported net earnings of $3.4 billion and earnings per share of $1.21, representing increases of 5.4% and 5.2%, respectively, as compared with the same period last year. These figures excluded an after-tax gain of $67 million representing the net impact of litigation matters.

J&J Stock Rating Report (JNJ) Rating and Financial Analysis

The company reported sales of $15.3 billion, an increase of 0.6% compared with the same period last year. During the quarter, Worldwide Consumer sales fell 5.4%, Worldwide Pharmaceutical sales increased 1% and Worldwide Medical Devices and Diagnostics sales rose 4.1%.

Analysts on average had been expecting earnings of $1.21 on revenue of $15.64 billion.

During the quarter, J&J received clearance from the U.S. Food and Drug Administration to market narafilcon B, the first and only silicone hydrogel daily disposable contact lens in the U.S. Also, in July, the company entered into a definitive agreement to acquire Micrus Endovascular, a global developer and manufacturer of minimally invasive devices to address hemorrhagic and ischemic stroke.

In light of all this, readers of

TheStreet

, in your opinion are J&J and P&G still desirable stocks to own in the current consumer climate? Take our poll below, to see what

TheStreet

has to say.

5 Consumer Stocks With Big-Time Upside

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-- Reported by Andrea Tse in New York

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