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Johnson & Johnson or Abbott Laboratories: Who Has Better Margins?

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Jan. 23 2019, Updated 9:01 a.m. ET

Margin guidance

In its third-quarter earnings conference call, Johnson & Johnson (JNJ) has forecasted YoY improvement of at least 150 basis points in pre-tax operating margin for fiscal 2018. The company’s margins in the first nine months of 2018 improved significantly due to a favorable product mix. However, the impact of the improved financial performance on Johnson & Johnson’s fiscal 2018 margins is expected to be partly offset by investments planned for the fourth quarter of 2018.

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In its third-quarter earnings conference call, Abbott Laboratories (ABT) has projected an adjusted gross margin of 59.5% for fiscal 2018. The company has been reporting improvement in underlying gross margins mainly due to synergies from the integration with recently acquired companies such as Alere and St. Jude. The company is focused on improving its gross margins to ensure a robust reinvestment rate.

Margin projections

Wall Street analysts have forecasted Johnson & Johnson’s gross margins to be 71.09%, 71.18%, and 71.30%, for fiscal 2018, fiscal 2019, and fiscal 2020, respectively. On the other hand, Abbott Laboratories is expected to report gross margins of 59.33%, 59.71%, and 59.99% for fiscal 2018, fiscal 2019, and fiscal 2020, respectively.

Wall Street analysts have also forecasted Johnson & Johnson’s adjusted net income margins to be 27.36%, 28.22%, and 28.65% for fiscal 2018, fiscal 2019, and fiscal 2020, respectively. On the other hand, Abbott Laboratories is expected to report adjusted net income margins of 16.68%, 17.68%, and 18.59%, for fiscal 2018, fiscal 2019, and fiscal 2020, respectively.

Johnson & Johnson is thus expected to report significantly higher margins as compared to Abbott Laboratories from 2018 to 2020. In the next article, we’ll compare the cost structure of Johnson & Johnson and Abbott Laboratories in greater detail.

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