NEW YORK (TheStreet) -- Dow component Johnson & Johnson (JNJ) beat analysts' earnings per share estimates by 12 cents, earning $1.66 a share when it reported earnings before the opening bell Tuesday. The large-cap pharmaceutical company also beat on revenue and raised full-year guidance.
While the Dow Jones Industrial Average set an all-time intraday high at 17120.34 this morning, J&J slumped to its 50-day simple moving average after leading the index until July 7.
Good news was thus priced into the company's share price upward momentum going into quarterly results. The stock set an all-time intraday high at $106.74 on July 7, which was a test of the weekly risky level at $106.61 that was shown in my pre-earnings covering all 30 Dow components posted that same day. J&J closed July 3 at $105.42 and was up 15% for the year to date on that date.
Johnson & Johnson is not a cheap stock. It has a 12-month trailing earnings per share ratio of 18.6 with a dividend yield of 2.7%. The stock trades at 11 times book value.
Let's look at the daily chart:
Courtesy of MetaStock Xenith
Johnson & Johnson, which recently traded around $103, opened Tuesday above its 21-day simple moving average at $104.84, then traded as low as $102.77, holding its 50-day simple moving average at $102.88. The stock is well above its 200-day simple moving average at $95.75. Daily 12x3x3 daily slow stochastic declined to 52.00 on a scale of 00.00 to 100.00.
Let's look at the weekly chart:
Courtesy of MetaStock Xenith
Johnson & Johnson has a positive but overbought weekly chart that turns negative given a close this week below its five-week modified moving average at $103.39. The price action since mid-2012 test of its 200-week simple moving average appears parabolic with this average now at $75.14.
Investors interested in buying J&J on weakness should consider doing so using a "good 'til canceled" limit order to buy weakness to a semiannual value level at $101.33. There is a monthly pivot at $102.69. Beware that lower semiannual and annual value levels are $85.93 and $81.35, respectively.
Investors looking to sell strength should use a GTC limit order to sell strength weekly and quarterly risky levels at $108.03 and $108.81.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff
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, increase in stock price during the past year, impressive record of earnings per share growth and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- JNJ's revenue growth has slightly outpaced the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- JNJ's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, JNJ has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- JOHNSON & JOHNSON has improved earnings per share by 34.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, JOHNSON & JOHNSON increased its bottom line by earning $4.82 versus $3.87 in the prior year. This year, the market expects an improvement in earnings ($5.88 versus $4.82).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 35.2% when compared to the same quarter one year prior, rising from $3,497.00 million to $4,727.00 million.
- You can view the full analysis from the report here: JNJ Ratings Report