Johnson & Johnson Looks Undervalued Heading Into Third Quarter Earnings

Johnson & Johnson (NYSE:JNJ) (“JNJ”) has been following the overall negative trend in the market since April of this year, but all things considered, JNJ hasn’t performed badly relative to the S&P 500, large-cap pharmaceuticals, and/or large-cap med-techs over the last year, nor since my last bullish write-up on the shares about two years ago. The performance of JNJ hasn’t been spectacular, but it has shown a lot of the GARP attributes that I had expected to see.

Looking at the upcoming third quarter earnings release, I think expectations are dialed in to a point where the bias should be positive for the company and stock. The average earnings estimate has come down about 5% over the last three months, and I think this is a reasonable reflection of pressures from currency (a strong dollar), ongoing inflation, and certain market disruptions like staffing shortages in hospitals. I do expect a relatively upbeat tone, however, with more visibility on improving margins and market share growth in 2023.

If you’re looking for a get-rich-quick name, I don’t think JNJ is really ever going to be the stock for you. If you’re looking for a name that should generate returns in the neighborhood of the S&P 500 with some counter-cyclical positives, not to mention potential upside from more active management, this is still a name to consider.

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Johnson & Johnson Looks Undervalued Heading Into Third Quarter Earnings