J&J earnings preview: Wall Street is still optimistic despite company’s legal issues

  • Written by MarketWatch
  • Published in Economics

Johnson & Johnson is scheduled to report second-quarter earnings before the market open on Tuesday.

Most recent news about J&J JNJ, -4.48%[1]   has been about its legal problems, but some analysts still think the future is bright for the baby-powder maker, thanks to a highly diversified slate of products spanning consumer health, pharmaceuticals and medical devices.

“We see JNJ’s diversified portfolio... as a potential strength,” analysts at Goldman Sachs wrote in a note to clients in May. That diversification means the company “will be less impacted by potential drug pricing headlines[2] [and] policy proposals[3] ahead of the 2020 presidential election, as was the case in 2015,” they wrote.

One of those so-called headlines hit the company’s stock hard on Friday. Shares of J&J dove 4.6% in afternoon trade after Bloomberg reported[4] that the U.S. Justice Department is pursuing a criminal investigation into whether the company lied about the possible cancer risks of its talcum powder. According to the report, a jury in Washington is examining documents related to what J&J officials knew about carcinogens in their products.

J&J is already facing thousands of lawsuits over the safety of its talc-containing baby powder and its alleged role in fueling the opioid crisis. Last year, a jury awarded $4.7 billion in damages to 22 women and their families who blamed their cases of ovarian cancer on asbestos in the company's talc products, though J&J is appealing the verdicts. In May, the company was ordered to pay $325 million[5] to a woman who claimed its talc powder contributed to her diagnosis of mesothelioma, a rare, asbestos-linked cancer. J&J is currently facing a legal battle with the state of Oklahoma[6], which sued the company over allegations that its marketing practices contributed to the opioid crisis. That litigation could potentially cost J&J up to $17.5 billion dollars — the cost of a 30-year abatement plan the state presented to fix the opioid problem.

Read: Health care is one of the stock market’s healthiest sectors right now[7]

Also read: Judge knocks down Trump rule requiring drug ads to reveal prices[8]

Shares of the company also dropped in May when the Oklahoma trial kicked off[9], falling to $131 per share. At the time, Cowen analyst Joshua Jennings said it would be hard for prosecutors to make a strong case against J&J, calling the decline “overdone.”

Despite the company’s legal issues, it seems that Wall Street still believes in J&J, though this latest tangle with the Department of Justice may change that. For now, here's what analysts are expecting on Tuesday from the health-products giant.

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