Psychiatry, It's A Killing.: J&J: Litigation Makes This Pharma A Pass in 2013

Wednesday, October 24, 2012

J&J: Litigation Makes This Pharma A Pass in 2013

Last Month we had:
Goldman Analyst Downgrades J&J: Says "Sell"
and now comes:

Seeking Alpha with;
J&J: Litigation Makes This Pharma A Pass in 2013
"Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. JNJ's headquarters is in New Brunswick, New Jersey. The company has a market cap of $191.7 billion, and its stock price is around $70.

On October 16th, JNJ reported third quarter earnings. The company had revenues of $17.1 billion which was a 6.8% increase from the third quarter of 2011. The net income was $2.9 billion which was a 10% decrease from the third quarter of 2011. The earnings per share were $1.05 which was a 9.5% decrease from the third quarter of 2011. During the earnings call the company raised its earnings forecast to $5.05 to $5.10 per share from $5.00 to $5.07 per share. It should be mentioned that earnings were reduced by $553 million because of a onetime write off related to research and development costs from the discontinuation of phase III trials of bapineuzumab IV and costs associated with the acquisition of Synthes.

Investors seemed to be encouraged by JNJ's increase in revenues, and higher revenue forecast, because the stock price moved higher by 1.4% after the announcement. JNJ has three distinct business divisions: consumer products, pharmaceutical, and medical devices. The consumer products division saw its sales decrease by 4.3%. The consumer products division is still feeling the effects of a consent decree with the Food and Drug Administration, which caused it to overhaul three of its manufacturing plants due to product quality problems."

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Conclusion

JNJ's stock moved higher by 1.4% after it announced earnings on October 16th. This seems to be a pattern for JNJ's stock price. While the stock continues to move higher, it does so at a very slow pace. For the year, JNJ's stock price is up by 9%. The 9% increase is much less than its competitors. For instance, for the year Abbott Laboratories (ABT)stock price is up by 30%, Sanofi (SNY) stock price is up by 28.5% andMerck (MRK) stock price is up by 29.5%. I think that investors have been wary about investing in JNJ because of its legal problems and its inconsistent earnings. I think that the trend will continue, and I expect that JNJ's stock price will creep higher, but I do not think that it will keep pace with its competitors.

Thank You Seeking Alpha