Johnson & Johnson (JNJ) is probably one of the biggest and best-known names in the health and wellness industry. The company, which was founded in 1886, is based in New Brunswick, New Jersey, and employs more than 130,000 people in 60 different countries. The company was among the first to produce sterile surgical supplies on a large scale before moving into pharmaceuticals and consumer health products.
The company is also among a handful of others that released a vaccine in 2020 against the COVID-19 virus, which bodes well. This article examines the financial results of the Dow component for the fourth quarter of 2020 and how the market reacted.
Key points to remember
- Johnson & Johnson is trading higher after beating fourth-quarter estimates and raising its guidance for 2021.
- Sales fell in the medical devices division, but rose in both pharmaceuticals and the consumer healthcare division in Q4-2020.
- The company has produced single-dose COVID-19 vaccines.
- The price structure forecast continued higher into the $190s.
JNJ Fourth Quarter Results
Johnson & Johnson traded at a record high after beating Q4 2020 revenue and earnings estimates and rising 2021 earnings per share (EPS) tips above consensus. The healthcare giant reported earnings of $1.86 per share, $0.03 better than estimates, while revenue rose 8.7% year-over-year to 22 .5 billion dollars, nearly a billion dollars more than expected.
Sales in the company’s pharmaceutical division grew 8.4% while the consumer healthcare division grew in fourth trimester of 2020 by only 3.1%. This was driven by sales of over-the-counter products, such as Tylenol, Pepcid and Listerine. Johnson & Johnson’s medical devices unit, however, saw a 10.5% drop due to the global crisis Covid-19 pandemic and delays in medical procedures.
J&J’s financial director (CFO) Joe Wolk made upbeat comments about the company’s COVID-19 vaccine. At the time of the financial results release, Wolk said he expected it to rival the efficiency of those offered by Moderna (mRNA) and Pfizer (DFP). The company received emergency use authorization for its single-dose vaccine from the U.S. Food and Drug Administration (FDA) in February 2021, which the Centers for Disease Control and Prevention said was effective. 66.3% in clinical trials.
Wall Street the consensus on Johnson & Johnson did not change after the results, as the company maintained an overweight rating based on nine buy recommendations and four hold recommendations. One analyst left J&J underweight, possibly due to the company’s exposure to baby powder. Price targets in the first quarter of 2021 ranged from a low of $139 to a high of $181.
While the company has a single-dose vaccine that has been cleared for emergency use by the FDA for the coronavirus, J&J is conducting Phase 3 clinical trials for a two-dose vaccine schedule.
Johnson & Johnson monthly chart (2000–2021)
A multi-year uptrend reached near $70 in 2005, marking resistance which was not breached until a breakout in 2013 sparked healthy buying interest. The rise peaked at $110 in 2014 and resumed in 2016, peaking again in the first quarter of 2018 when President Trump fired the first shot in the trade war with China. Breakout attempts failed in the fourth quarter of 2018 and the second quarter of 2019, while a buying impulse in February 2020 hit the mid-$150s.
The stock faltered during the pandemic decline in March, posting a low higher in the $130s and fading into a V-shaped recovery that made a round trip to the previous high in April. Price action finally hit new highs at the end of 2020, paving the way for strong returns in 2021. The stock is currently trading near $170, with a broad price structure providing a measured target move around $190.
The strong price action in January 2021 also broke out at the top of a three-year period extended training, also known as the Megaphone model. This is extremely bullish, clearing a potentially bearish pattern from the table while creating a low risk buying opportunity near $160. The breakout suggests the market has dismissed blame for the baby powder controversy, despite more than 20,000 active cases and numerous appeals.
A broad formation is a price chart pattern identified by technical analysts, which is characterized by increasing price volatility and visualized as two diverging trend lines, one rising and one falling. . It usually occurs after a significant rise or fall in the price action of the securities.
Founded in 1886, New Jersey-based Johnson & Johnson is one of the most recognizable names in the world of pharmaceuticals, medical devices and consumer healthcare products. Consumers can find some of its best-known brands all over the world, including Tylenol, Band-Aid and Listerine. The company saw declines in the fourth quarter of 2020 due to the global COVID-19 pandemic, but it remains hopeful that its vaccine and ease of restrictions will help it continue to grow.
Disclosure: The author held no position in the aforementioned titles at the time of publication.
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