JNJ is reporting Q3 earnings next week.
The stock has come down since its post-Q2 highs.
On a valuation basis JNJ is much more attractive than it has been, but is it enough?
To say that Johnson & Johnson (NYSE:JNJ) hasn’t been one of my favorite stocks in the past is an understatement. The company’s track record is impeccable but at the same time, the stock has been very expensive on any metric you can think of. That has led me to stay on the sidelines and while I’ve missed a decent rally as a result, it seems to me that JNJ has been inflating and the only remedy is lots of sideways action or an outright selloff. Following the Q2 earnings report the stock hit new highs but since that time, it has drifted down, certainly making it more attractive than it has been in the past. Heading into the Q3 report due out next week, here’s what I’m looking for to determine if JNJ is finally a buy or if flat is the new up for JNJ.
Revenue growth has always been a point of contention for me with respect to JNJ because, well, there hasn’t been much in the past. JNJ’s multiple suggests lots of growth but that just isn’t the case. Analysts are looking for ~4% revenue growth in Q3, roughly congruent with what it did in Q2. That has been good enough for investors in the past but with the stock drifting down, is it still good enough?
In Q2 the Pharma segment made up for marked weakness at its other units so the mix will be interesting to see in Q3 as well. The consolidated number is obviously very important but in terms of sustainability, the mix is meaningful as well. After all, having one strong segment isn’t as desirable as broad-based strength.
Fuente: Seeking Alpha
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