Johnson & Johnson (JNJ) Tops Earnings Estimate; A Safe Play For A Dividend Portfolio

After topping revenue and earnings estimates, Johnson & Johnson appears to be a dependable player for defensive investors and retirees. Johnson & Johnson generated revenue growth of above 4.2% to $17.8 billion in the third quarter this year, beating analysts’ estimates by $110 million.

The company’s all three business segments performed well in the third quarter amid its operational, research & development and productivity strategies. Though, JNJ’s consumer business segment declined 1.6% only due to currency fluctuation, strong growth in Pharmaceutical and Medical Devices & Diagnostics segments allowed it to post a mid-single-digit growth in consolidated sales.

Its pharmaceutical business, which is its largest revenue generation segment, posted solid sales growth of 9.2%, while Medical Devices & Diagnostics segment enlarged 1.1% over the same period of last year.

Considering strong financial results from pharmaceutical business, JNJ’s management has been aggressively investing in growth opportunities to sustain that growth in the following years.

In an earnings call, its CEO said, “With a number of regulatory approvals, several new drug application submissions and new breakthrough therapy designations from the FDA, we are increasingly confident in our pipeline expectation of filing 10 new pharmaceutical products between 2015 and 2019, each with revenue potential over $1 billion.”

On the other hand, the company has also enhanced its potential to turn a mid-single digit growth in sales to a double-digit growth in earnings. JNJ’s management has successfully turned a sales growth of 4.2% in the third quarter into an earnings growth of 12.8%, compared with the same period of last year.

Furthermore, the company has also maintained its sales guidance for the full-year 2016 of $72.2 billion, compared with sales of $70 billion last year. Additionally, the company increased its adjusted earnings guidance for the full-year 2016 to $6.73 per share, compared to earnings per share of $5.48 per share last year.

Its cash generating potential has also been expanding with the growth in earnings. The company has a long dividend history, while the solid growth in earnings and cash generation trend offers room for further increases. Therefore, Johnson & Johnson appears to be a dependable stock for defensive investors and retirees.

DISCLAIMER: The author does not hold any positions in any of the above companies.

Alexander is an analyst for who specializes in index and commodity trading. His outlook is usually near-term to medium-term. He has over 10 years of experience in the financial industry and began his career at the dealing desk. Alexander holds a Bachelor’s degree in Economics from University of Delaware.