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JPMorgan Cut Its Johnson & Johnson Forecast Before Earnings, But Why?

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In a report published Monday, JPMorgan analyst Michael Weinstein discussed Johnson & Johnson (NYSE: JNJ)'s upcoming first quarter report, scheduled for Tuesday, April 14.

Weinstein noted that he is expecting a largely in-line quarter on the top line given an improved pharmaceutical performance that will offset slower growth in the Medical Devices and Consumer segments. As such, the analyst is now projecting first quarter sales of $17.28 billion, $90 million below the Street's estimates.

On the bottom line, the analyst is expecting the company to exceed consensus Cash earnings per share estimates on better operating leverage and modest gains in the Other Income line. The analyst is now expecting first quarter cash EPS of $1.54, two cents better than the Street's estimates.

Related Link: Johnson & Johnson Teams With Google On Surgery Robot Development

Looking forward, Johnson & Johnson is expected to lower its 2015 Cash earnings per share guidance as the company is facing a "challenging" year from the Olysio comp ($2 billion of 2014 sales that's going away) to the Diagnostics divestment (closed mid-year), which more than offset the Nucynta gain that is expected to be booked in the second quarter.

Moreover, Johnson & Johnson faces a currency headwind that has worsened since the company laid out its guidance on January 20.

Weinstein is now modeling full year 2015 Cash earnings per share of $6.10, down from prior estimates of $6.25.

Bottom line, shares are unlikely to outperform in 2015 absent a significant market pullback of a large accretive acquisition (which is considered unlikely).

Shares remain Neutral rated with a price target lowered to $108 from a previous $110.

Latest Ratings for JNJ

DateFirmActionFromTo
Jan 2021Raymond JamesMaintainsOutperform
Jan 2021Credit SuisseMaintainsOutperform
Jan 2021Morgan StanleyMaintainsOverweight

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