Johnson & Johnson Jumps 6% on Earnings Beat and Revised Guidance: Does it Deserve a Buy?

Johnson & Johnson (JNJ) has had its ups and downs over the past few months, but it appears as if steady growth is ahead. The company has boosted its previous guidance for the year after Thursday’s earnings report came in well above analyst expectations.

Johnson & Johnson saw sales growth of 6.3% for the quarter, posting a figure of $25.53 billion compared to last quarter’s $24.02 billion. This beat out the Wall Street estimate of $24.63 billion.

But, it wasn’t just sales that climbed for the second quarter – profitability soared, too. Net income of $5.14 billion was an improvement over this time last year when the company saw just $4.814 billion in net income. With adjusted earnings per share of $2.80 beating out the FactSet consensus of $2.62, the company delivered on all fronts.

According to Chief Executive Joaquin Duato this can be attributed to an enhanced focus on Pharmaceutical and MedTech innovation. With numerous catalysts coming to fruition, the company is poised to outperform the previously forecasted second half of the year.

As such, the guidance has been lifted for the full year. The new operational sales target of $99.3 billion – $100.3 billion is up from the previously forecasted $97.9 billion – $98.9 billion. EPS for the full year got a boost too, as it now sits at $10.70 – $10.80, up from the previous $10.50 – $10.60.

While the stock has climbed more than 6% on this news so far in Thursday morning’s trading session, it’s still down nearly 4% this year. And with concerns over the company’s ongoing talc litigation, some experts aren’t quite convinced that the time is right to invest in JNJ.

That being said, we’ve taken a look at the stock through the VectorVest stock analyzer. Below, you’ll discover 3 things that will help you feel more confident in trading JNJ – whether you end up buying, selling, or holding off.

JNJ Has Fair Upside Potential, Safety, and Timing

The VectorVest system simplifies your trading strategy by giving you clear, actionable insights through a proprietary stock rating system. It consists of just 3 ratings - relative value (RV), relative safety (RS), and relative timing (RT).

Each of these sits on a scale of 0.00-2.00, with 1.00 being the average. This makes interpretation quick and easy. Or, better yet, follow the buy, sell, or hold recommendation the system issues based on these ratings for any given stock, at any given time. As for JNJ, here’s what we’ve found:

• Fair Upside Potential: The RV rating of 1.01 is just above the average, and is deemed fair. This is a comparison of the stock’s long-term price appreciation potential to AAA corporate bond rates and risk, which is a far better indicator than a simple comparison of price to value alone. And, we also see that the stock is fully valued at its current price.
• Fair Safety: In terms of risk, JNJ is a fairly safe stock - as evidenced by the RS rating of 1.08. This rating is calculated through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
• Fair Timing: While the 6% gain JNJ has made so far today is a great stock, the timing for this stock is still just fair - with an RT rating of 1.05. This is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year.

The overall VST rating of 1.05 is considered fair for JNJ. But what does this mean for you as an investor - should you buy or sell this stock now, or hold off for a stronger price trend to form? Get a clear answer on your next move through a free stock analysis at VectorVest today!

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VectorVest advocates buying safe, undervalued stocks, rising in price. The JNJ earnings beat and raised guidance is certainly cause for excitement, but it hasn’t manifested itself into a meaningful trend just yet. Right now, the upside potential, safety, and timing are all considered fair - right around the average.

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