Investing Ideas

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Earnings preview: Johnson & Johnson could surprise Wall Street

07-13-2009

From: BloggingStocks

Johnson & Johnson (NYSE: JNJ), a company that counts Procter & Gamble (NYSE: PG) and Pfizer (NYSE: PFE) as colleagues, will report results for the second quarter on Tuesday, July 14. JNJ is expected to post a bit of a profit decline. Last year's Q2, according to Earnings.com, saw the health-care business earn $1.18 per share. This time around, analysts are thinking that JNJ will do somewhere around $1.11 per share.

Will JNJ beat the analysts? It's quite possible, since the company has a good record on this count. As a matter of fact, JNJ beat predictions by four cents back in April. Sales, however, came in a little weak. Interestingly enough, the market didn't really care too much about the earnings performance on that day. Shares had rallied a bit in pre-market trading, but they closed slightly down by the end of the regular session. I found a similar situation back in January.

So, if you ask me, I think we'll see a beat on the bottom line this week, but I'm not convinced the market will send shares of JNJ higher. Of course, how many individual investors actually trade a blue chip like JNJ? For the most part, shareholders are probably keeping this one for the long term in a core portfolio. Recently, Joseph Lazzaro highlighted the business as a potential idea for a college fund. I would tend to agree. To that point, most investors love to read the statement of cash flows and gauge how well JNJ is doing when it comes to money generated from operations. So long as that metric is keeping ahead of dividend obligations, everything should be fine. Investors love JNJ and its dividend-growth quotient.

JNJ just isn't on my radar in terms of buying ahead of the report. I'll leave such posturing to the bigger guns on Wall Street. I just want to know that cash is still flowing to the company's coffers -- and I'm sure it will be.