Johnson & Johnson Earnings Guidance Warning

Investing.com — Wells Fargo analysts have cautioned that Johnson & Johnson (NYSE: JNJ) may lower its earnings guidance for 2024 during its third-quarter results announcement, despite expectations of stable sales growth.

In a note to clients, Wells Fargo highlighted that while JNJ’s underlying sales growth target for 2024 is likely to remain stable, the company may revise its earnings per share (EPS) guidance downward due to recent acquisitions.

“JNJ expects EPS dilution of $0.24 from the V-Wave acquisition, which would lower 2024 reported EPS guidance from $9.97-$10.07 to $9.73-$9.83, all else equal,” noted Wells Fargo.

Analysts believe that if the V-Wave deal closes before JNJ reports Q3 earnings, the company will likely update its guidance accordingly. However, the potential reduction could be partially offset by a smaller foreign exchange (FX) headwind, which is now anticipated to have a neutral to slightly positive effect on EPS.

Wells Fargo forecasts a Q3 EPS of $2.09, below the consensus estimate of $2.18, and notes that this consensus may not fully account for dilution from JNJ’s acquisition of Numab. Their forecast includes an expected $1.25 billion impact from in-process research and development (IPR&D) related to the deal.

While sales growth guidance is expected to stay intact, the analysts warned that underperformance in JNJ’s Vision Surgical division and lingering effects from anti-corruption policies in China could pose challenges for growth in the second half of 2024.

Finally, Wells Fargo emphasized that investors should keep an eye on updates regarding the ongoing talc litigation, which JNJ is attempting to resolve through a voluntary prepackaged bankruptcy.