Should you buy or sell JNJ shares after delivering mixed Q3 results?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 19, 2021
  • Johnson & Johnson shares on Tuesday edged higher by 2.40% despite posting mixed Q3 results.
  • The company announced its most recent quarterly results before markets opened, beating earnings estimates.
  • The company also boosted its FY 2021 EPS forecast ahead of the consensus Street forecast.

On Tuesday, Johnson & Johnson (NYSE:JNJ) shares gained 2.4% after announcing its most recent quarterly results. The company reported its fiscal third-quarter earnings per share before markets opened, beating analyst estimates.

The company posted FQ3 non-GAAP earnings per share of $2.60, beating the consensus analyst estimate of $2.35. On the other hand, its GAAP EPS of $1.37, missing the average for analyst expectations of $2.17, while revenue for the quarter of $23.34 billion, was below estimates despite increasing by 10.7% Y/Y.

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Johnson & Johnson’s FY2021 revenue guidance of $92.8-$93.3 billion is also short of the consensus Street forecast of $93.97 billion. However, it raised its full-year EPS guidance to $9.77-$9.82 from $9.50-$9.60, ahead of the average analyst estimate of $9.64.

Is JNJ stock undervalued?

From an investment perspective, Johnson & Johnson shares trade at an attractive forward P/E ratio of 15.37, making the stock a compelling option for value investors. 

Moreover, although analysts expect earnings to decline by 4.42% this year, they also forecast a significant rebound of 7.83% next year, before rising at an average annual rate of 8.89% over the next five years.

Therefore, Johnson & Johnson could be a great option for growth investors targeting quality blue-chip stocks.

Source – TradingView

Technically, Johnson & Johnson shares seem to have recently made an upward breakout from a descending channel formation. 

However, the stock still trades significantly below its 100-day moving average and is also far from reaching overbought conditions. Therefore, investors could target extended gains at about $166.76, or higher at $170.48.

On the other hand, if the stock pulls back prematurely, it could find support at about $160.49, or lower at $157.37.

It could be time to invest in JNJ

In summary, although Johnson & Johnson shares are up more than 4% since last week, the stock is still more than 8% from its October highs, thus swinging to a net year-to-date gain of just 4.77%.

Therefore, given the company’s solid FY2021 earnings guidance, it could be time to buy JNJ shares.

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