Johnson & Johnson is scheduled to report Q3 2021 results on Tuesday, October 19. In the previous report for Q2 in July, the company reported sales of $23.31 billion, an increase of 27.1% compared with $18.33 billion in the same quarter last year. Net profit was $6.28 billion, up 73.1% against $3.63 billion during the year-ago quarter. Diluted earnings per share (EPS) increased from $1.36 to $2.35. Adjusted diluted EPS rose 48.5% to $2.48 this year. This growth was driven by sales of various drugs, such as Stelara, Darzalex, Tremfya, Erleada, Imbruvica and Invega Sustenna/Xeplion/Invega Trinza/Trevicta (paliperidone palmitate).

In Q3, the earnings report is likely to be driven by the fast-growing healthcare business due to increased sales volume of medical devices, increased sales of its cancer drugs, Imbruvica and Darzalex, immunology drugs, Stelara and Tremfya, along with contributions from Covid-19 vaccines. With more than half of the US population fully vaccinated and at the international level vaccination rates are gradually increasing, this will bode well for J&J’s medical device business. However, there may be short-term margin pressures due to inflationary constraints and supply chain constraints. Also, since the Covid-19 vaccine is sold on a non-profit basis, this will have an impact on overall drug margins.

EPS consensus estimate

  • According to Zacks Investment Research, based on 7 analyst forecasts, the consensus EPS forecast for the quarter was $2.37. The reported EPS for the same quarter last year was $2.2. Revenue is forecast to be $23.62 billion, up 12.1% from last year’s quarter, with the stock ranking at #4.

  • The Tipranks consensus EPS forecast for the quarter is $2.36 with a consensus 6 analyst rating of moderate buy.

The good news, supporting the company’s upcoming sales and business development reports, is that the FDA and VRBPAC unanimously voted 19-0 to recommend an Emergency Use Authorization (EUA) for the approval of a booster dose of Johnson & Johnson COVID-19 vaccine for adults 18 years of age and older at least two months after initial vaccination with a single-use vaccine. Voting is based on findings from the company’s two clinical trials, including the ENSEMBLE 2 Phase 3 study. Phase 3 clinical data and current world data, both suggest Johnson & Johnson COVID-19 vaccine disposables are strong and durable. The company anticipates a decision from the FDA on EUA amendments to booster doses of the Johnson & Johnson COVID-19 vaccine in the coming days and plans to submit relevant data to other regulators, the World Health Organization (WHO) and National Immunization Technical Advisory Groups (NITAGs) across the board to inform decision-making on local vaccine administration strategies, as needed.

#Johnson&Johnson shares are at very attractive levels for now, positive earnings reports should allow the price of this asset to continue the rally which was delayed during August. The asset price, currently trading around $161 and looks likely to be undervalued.

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#Johnson&Johnson, D1

#Johnson&Johnson shares debuted its rise almost at the same time as most stocks, namely when the Central Bank issued a massive stimulus that caused abundant liquidity in the market. The asset extended gains through 2021, to a peak of 179.91 in August by accumulating gains of +14.7%, before erasing all of January’s gains in the first week of October this year. This decline is a corrective wave that seeks a price balance at the peak of the pandemic between February-April 2020 (156.99).

Downward momentum seems to have stopped at this equilibrium level, forming a double bottom pattern below the 200-day EMA. This is validated by the RSI which has started to depart from the oversold level towards the upside and the CCI50 is starting to approach the neutral level. The decline started when the Fed’s tapering issue blew hard in August.

Ahead of the Q3 earnings report, asset prices look quite neutral, a move above the minor resistance of 162.59 would have implications for an increase towards the 165.30 price level or around the 38.2% FR level. A move above this price level, would signal that the decline to the 179.91 peak has ended in the short term and the asset price will return to the upside for 168 and 171. On the downside, a price move below the double bottom level, would extend the 179.91 slide to the March 2021 low of 151.44.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

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