Wednesday, October 20, 2021

J&J’s Outlook Gives Investors a Booster

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News shaping
the markets today

     

What’s happening: Shares of Johnson & Johnson gained on Tuesday, after the company reported upbeat earnings for its third quarter and boosted its guidance.

What happened: Despite reporting upbeat quarterly profits, J&J failed to meet sales expectations for the third quarter.

However, sales at one of its major divisions recorded growth for the quarter following a decline in the previous three-month period.

How were the results: The pharma giant reported growth in both revenues and earnings for the third quarter.

  • Sales climbed 10.7% year-over-year to $23.3 billion for the third quarter, missing market views of $23.6 billion.
  • Adjusted earnings came in at $2.60 per share, up 18.2% from the same quarter last year earlier, surpassing Street expectations of $2.35 per share.

Why it matters: Johnson & Johnson faced had major issues with its covid-19 vaccine production earlier in the year, following quality issues at its Baltimore manufacturing facility. In July, management projected the production of between 500 million and 600 million vaccine doses for the year, down from their previous forecast of billion shots.

The company’s vaccine sales came in at just over $500 million, up more than 200% from the previous quarter.

Sales of J&J’s pharmaceutical division grew 13.8% year-over-year to $13 billion, including sales of its covid-19 vaccine. Sales in its medical devices division surged 8% from the previous year to $6.6 billion. With patients avoiding surgeries amid rising covid-19 cases, the company’s medical device sales had dipped to $23 billion in 2020, versus $26 billion in the previous year.

Market sentiment was further lifted by the FDA’s Vaccines and Related Biological Products Advisory Committee recommending the authorisation of a second dose of the company’s covid-19 vaccine for all recipients of the one-dose inoculation.

Johnson & Johnson raised its full-year earnings outlook to between $9.77 and $9.82 per share, from its prior forecast of $9.60 to $9.70 per share. The company also raised its revenue guidance from between $93.8 billion and $94.6 billion to a range of $94.1 billion to $94.6 billion for the year.

How shares responded: Johnson & Johnson’s shares gained 2.3% to close at $163.87 on Tuesday. The stock traded as high as $179.92 but eased before the closing bell.

What to watch: Investors will keep an eye on the FDA’s final authorisation of J&J’s covid-19 vaccine booster dose. Markets will also monitor the impact of a possible approval of mix-and-match shots of covid-19 vaccines on J&J’s overall sales.

The Markets Today

     

European stocks will be in focus today ahead of a couple of economic reports from the common bloc.

Context: European stocks recorded gains on Tuesday, with investors monitoring earnings reports from several companies.

Details: Investors are assessing earnings reports from companies and the impact of supply chain disruptions and rising energy prices on performance. European firms are cumulatively projected to record around 48% year-over-year growth in profits.

Various European companies, including Kering, Danone, and Deutsche Boerse, released their earnings reports on Tuesday. Strong earnings from US companies, including Johnson & Johnson and Procter & Gamble, also supported market sentiment.

However, overall gains remained muted with a decline of around 1% in food and beverage stocks after Danone issued a warning of inflationary pressures worsening next year.

The pan-European Stoxx 600 index has climbed around 3% so far this month, following a 3.4% decline a month ago. The index closed higher by 0.33% at 468.58 on Tuesday, with utilities leading the surge.

London’s FTSE 100 index rose 0.19%, while Germany’s DAX 40 added 0.27%. However, France’s CAC 50 bucked the trend and lost 0.05%.

What to watch: Investors await the release of Eurozone’s inflation rate and current account data. The Eurozone current account surplus, which had widened to €30.2 billion in July, is expected to narrow to €25.1 billion in August. The bloc’s annual inflation rate is projected to accelerate to 3.4% in September.

The covid-19 pandemic remains a major concern for markets, with total global cases exceeding 242.3 million.

Other Markets: US indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.56%, 0.74% and 0.72%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s producer prices, UK’s inflation rate, retail price index and core producer prices, Italy’s construction output and current account, South Africa’s inflation rate, America’s MBA mortgage applications and crude oil inventories, Canada’s inflation rate, Turkey’s government debt, Argentina’s leading economic index, Russia’s producer prices, as well as China’s foreign direct investment.