Why Johnson & Johnson (JNJ) Is Down Today

NEW YORK (TheStreet) -- Johnson & Johnson (JNJ) was falling 2.3% to $92.87 on Tuesday after the company announced that it expects full-year 2014 earnings to come in short of forecasts.

J&J said it expects 2014 earnings to be between $5.75 and $5.85 a share, compared to $5.52 in 2013. Analysts expected earnings to fall at the high end of that range.

The company reported a fourth-quarter profit of $3.52 billion, or $1.23 per share, up from $2.57 billion, or 91 cents per share, one year earlier. After excluding items related to acquisitions, an increase in litigation accrual and other items, Johnson & Johnson's adjusted earnings rise to $1.24 from $1.19. Revenue also increased 4.5% to $18.36 billion. Analysts anticipated a revenue of $17.95 billion and a per-share profit of $1.20.

The company's pharmaceutical department helped lead sales growth, and Johnson & Johnson noted fourth-quarter earnings rose 37%.

TheStreet Ratings team rates JOHNSON & JOHNSON as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate JOHNSON & JOHNSON (JNJ) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, reasonable valuation levels and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JNJ's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 3.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • JNJ's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.44, which illustrates the ability to avoid short-term cash problems.
  • Compared to its closing price of one year ago, JNJ's share price has jumped by 30.39%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, JNJ should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $5,947.00 million or 32.24% when compared to the same quarter last year. In addition, JOHNSON & JOHNSON has also modestly surpassed the industry average cash flow growth rate of 31.10%.
  • You can view the full analysis from the report here: JNJ Ratings Report