Fly Intel: What to watch in Johnson & Johnson earnings report
Johnson & Johnson (JNJ) is scheduled to report the results of its third fiscal quarter after the market close on Tuesday, October 15, with a conference call scheduled for 8:30 am EDT. What to watch: 1. LEGAL COSTS: J&J's legal costs have been on investors' minds for years as legal rhetoric surrounding the company's liability in regards to the opioid crisis and the increase in suits over its talc-based baby powder pick up steam. Last week, a Philadelphia jury ordered the company to pay $8B in punitive damages to a man who said its Risperdal drug caused enlarged breast tissue, adding to the company's legal woes, although the company believes the $8B in punitive damages will be overturned. 2. HISTORICALLY CHEAP: On October 11, Lee Hambright, an analyst at Bernstein, wrote that the stock is "historically cheap," currently trading at a 17% discount to its sum-of-the-parts and a 13% discount to the S&P 500 Index. The analyst, who believes J&J will resolve its legal liability for $10B-$12B, said the shares reflect a worst-case scenario with $50B of liabilities being priced in. Following discussions with legal experts, Hambright has a "hard time seeing the worst-case scenarios playing out." The analyst estimated Johnson & Johnson faces about $5B of liability for opioids, another $5B for talc, and $800M for Risperdal. 3 HIV TREATMENT: Johnson & Johnson is getting ready to test a new type of vaccine against HIV, the virus that causes AIDS. According to a Bloomberg article out in July, Johnson & Johnson is laying the groundwork to "test an experimental HIV vaccine in the U.S. and Europe in a move toward developing the first immunization against the deadly disease after decades of frustration." J&J hopes the "vaccine that will work in populations around the world that are infected with myriad strains of the rapidly changing virus. Other candidate shots have focused on preventing single varieties, added the Bloomberg story.