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Return On Capital Employed Overview: Johnson & Johnson

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Looking at Q2, Johnson & Johnson (NYSE: JNJ) earned $3.99 billion, a 31.06% increase from the preceding quarter. Johnson & Johnson's sales decreased to $18.34 billion, a 11.38% change since Q1. Johnson & Johnson earned $5.79 billion, and sales totaled $20.69 billion in Q1.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Johnson & Johnson’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future. In Q2, Johnson & Johnson posted an ROCE of 0.06%.

It is important to keep in mind ROCE evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but several factors could affect earnings and sales in the near future.

Return on Capital Employed is an important measurement of efficiency and a useful tool when comparing companies that operate in the same industry. A relatively high ROCE indicates a company may be generating profits that can be reinvested into more capital, leading to higher returns and growing EPS for shareholders.

In Johnson & Johnson's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q2 Earnings Recap

Johnson & Johnson reported Q2 earnings per share at $1.67/share, which beat analyst predictions of $1.48/share.

 

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Posted-In: Earnings News Health Care General