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Michael Fowlkes' Analyst Insights

Options and ETF Analyst Writer
Michael Fowlkes
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Johnson & Johnson reports Q4 numbers January 23

1/20/2018 12:54 PM

What's Happening

Healthcare and personal goods maker Johnson & Johnson (JNJ) will report its fourth-quarter results on January 23. The company will report before the market open, with the consensus calling for earnings of $1.72 per share, up from $1.58 during the same period last year. JNJ has appreciated 5.5% since the start of the year.

Technical Analysis

JNJ was recently trading at $146.87, down $1.45 from its 12-month high and $36.11 above its 12-month low. Overall technical indicators for JNJ are bullish and the stock is in a strong upward trend. The stock has recent support above $138.75, and recent resistance below $148.25. Of the 19 analysts who cover the stock, nine rate it a “strong buy”, two rate it a “buy”, six rate it a “hold”, and two rate it a “strong sell”. JNJ gets a score of 68 from InvestorsObserver’s Stock Score Report.

Analyst's Thoughts

Johnson & Johnson shares have enjoyed steady gains over the last year, fueled in part to a string of better than expected quarterly reports. Earnings have consistently topped analyst estimates, but the company has struggled with revenue, due in part to the impact of the strong dollar. After three straight revenue misses, the company was able to top analyst estimates last quarter, which drove shares record high. Profits will be important as always, but pay attention to the sales figure, which will be a key driver of the stock following the report. The consensus calls for revenue of $20.22 billion, versus $18.1 billion during the same period last year. The stock trades at $146.87 with an average price target of $149.38.

Stock Only Trade

If you're looking to establish a long stock position in JNJ, consider buying the stock under $147.00. Sell if it falls below $132.50 or take profits if it gets to $169.00.

Bullish Trade

If you want a bullish hedged trade on the stock, consider a March 130/135 bull-put credit spread for a 25-cent credit. That's a potential 5.3% return (34.3% annualized*) and the stock would have to fall 7.9% to cause a problem.

Bearish Trade

There are no bearish trades on the stock at this time with enough downside protection for the level of return we seek.

Covered Call Trade

If you like the stock, but wish to lower your cost basis on a new position, you may want to consider an April $150.00 covered call. Buy JNJ shares (typically 100 shares, scale as appropriate), while selling the April $150.00 call for a debit of $144.00 per share. The trade has a target assigned return of 4.1%, and a target annualized return of 16.7% (for comparison purposes only). 


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