johnson & johnson (JNJ) is one of the most trending stocks recently among Zacks.com visitors. Therefore, we recommend considering several factors that can affect a stock's short-term performance.
Over the past month, shares of the world's largest healthcare products maker have risen +1.8%. This compares to a +2.5% change in the Zacks S&P 500 Composite Index. During this period, the Zacks Large Cap Pharmaceuticals industry, which includes Johnson & Johnson, has gained 6.6%. The key question here is: What is the future direction of the stock price?
While media reports and rumors about significant changes in a company's business outlook typically trigger stock price trends and lead to immediate price movements, there are always certain fundamental factors that ultimately drive the buy-and-hold decision. Exists.
Regarding revisions to performance forecasts
Zacks prioritizes evaluating changes in a company's future earnings expectations above all else. That's because we believe that the present value of future income streams determines the fair value of a stock.
Our analysis is fundamentally based on how the sell-side analysts covering a given stock are revising their earnings estimates to account for the latest business trends. As a company's earnings expectations rise, so does the fair value of its stock. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, which causes the stock price to rise. For this reason, empirical research has shown that there is a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Johnson & Johnson is expected to post earnings of $2.63 per share, down 1.9% from the year-ago period. The Zacks Consensus Estimate has changed -0.7% over the past 30 days.
The consensus earnings estimate for the current fiscal year of $10.67 represents a +7.6% year-over-year change. This estimate has changed by +0.2% over the past 30 days.
Next year's consensus earnings estimate of $11 represents a +3.1% change from the earnings Johnson & Johnson was expected to report a year ago. Over the past month, the forecast has changed by -0.8%.
The Zacks Rank, a proprietary stock evaluation tool with a strong, outside-audited track record, leverages the power of earnings estimate revisions to provide a more definitive picture on near-term stock price direction. To do. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, gives Johnson & Johnson a Zacks Rank #3 (Hold).
The chart below shows the company's consensus EPS estimate over the next 12 months over time.
12 months EPS
Revenue growth forecast
There's no question that a company's profit growth is the best indicator of its financial health, but nothing will happen if it doesn't make a profit. It's nearly impossible for a company to expand its bottom line without growing it over the long term. Therefore, it's important to know a company's earnings growth potential.
For Johnson & Johnson, the consensus revenue estimate for the current quarter is $21.31 billion, representing a year-over-year change of -13.9%. Estimates for the current and next fiscal year are $88.36 billion and $90.46 billion, representing changes of -5% and +2.4%, respectively.
Last reported results and surprising details
Johnson & Johnson reported revenue of $21.4 billion in its last reported quarter. This represents a -9.8% year-over-year change. EPS for the same period was $2.29, compared to $2.35 in the year-ago period.
The reported earnings represent a surprise of +1.34% when compared to the Zacks Consensus Estimate of $21.11 billion. EPS surprise was +0.88%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company has surpassed consensus revenue estimates every time during this period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. To predict a stock's future price performance, it is important to determine whether the current price accurately reflects the intrinsic value of the underlying business and the company's growth prospects.
The present value of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), and the past value of your company Comparing a company to its peers based on these parameters can help you see if it is overvalued, overvalued or undervalued, but how reasonable its stock is You can get a good idea of what
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) categorizes stocks into five groups, ranging from A to F, with A being B B is better than C, and so on), and can help identify whether a stock is overvalued, fairly valued, or temporarily undervalued. Masu.
Johnson & Johnson is rated B on this score, indicating that it trades at a discount compared to its industry peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and much of the other information on Zacks.com, may help you decide whether the market buzz about Johnson & Johnson is worth paying attention to. However, the company's Zacks Rank #3 suggests it could outperform the broader market in the near term.
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