A Look at Johnson & Johnson’s 2018 Guidance

Johnson & Johnson (JNJ) provided 2018 guidance during the company’s earnings results release on January 23, 2018. The company stated that the guidance included the impact of the new tax reforms. However, the company suggested modeling an effective tax rate excluding special items of 16.5% to 18% for 2018. The suggested tax rate reflects 1.5% to 2.5% of the positive impact on the company’s normalized tax rate due to the impact of new US tax legislation.

Johnson & Johnson’s operational sales growth is expected to be in the range of 3.5% to 4.5% for the full fiscal 2018. These estimates represent constant currency sales guidance of $79 billion to $80 billion. The company included the impact of generics for Remicade, Tracleer, and Procrit, but it doesn’t expect any impact from generic competition for Zytiga, Prezista, Invega Sustenna, Risperdal Consta.

The reported 2018 sales growth is expected to be in the range of 5.5% to 6.5%, amounting to dollar sales of $80.5 billion to $81.5 billion. J&J’s medical device peers Abbott Laboratories (ABT), Zimmer Biomet Holdings (ZBH), and Stryker (SYK) are expected to register sales growth of 12.6%, 2.2%, and 7.7%, respectively, during their next fiscal years. The Vanguard Value ETF (VTV) has 2.9% exposure to Johnson & Johnson.

Johnson & Johnson expects to post adjusted EPS (earnings per share) in the range of $8 and $8.20. On an operational adjusted basis, EPS is estimated to grow in the range of 7% to 9.5%. The company has consistently been delivering on its goal of faster earnings growth as compared to sales growth. Johnson & Johnson plans to improve its operating margin by approximately 1% for the full fiscal 2018. Also, the company’s research and development investment is expected to grow in fiscal 2018.