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What Analysts Project for JNJ’s Margins and Interest Expenses

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Jan. 31 2019, Updated 7:31 a.m. ET

Margin projections

In its fourth-quarter earnings investor presentation, Johnson & Johnson (JNJ) projected its adjusted pre-tax operating margin in fiscal 2019 to be slightly higher on a YoY basis. Wall Street analysts expect Johnson & Johnson to report operating margin of 30.88% in fiscal 2019.

According to Johnson & Johnson’s fourth-quarter earnings conference call, the company is focused on investing in its high margin businesses such as the Pharmaceutical segment and the Medical Device segment to return to above-market growth by 2020. According to the company’s fourth-quarter earnings conference call, Johnson & Johnson’s Pharmaceutical business has the best-in-class margins, while its Medical Device business has higher margins as compared to its peers. Johnson & Johnson expects the biggest opportunity for margin expansion to arise from its Consumer business, which currently has lower margins as compared to peers.

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Wall Street analysts expect Johnson & Johnson to report a gross margin of 72.36% in fiscal 2019, a YoY drop of three basis points. The company is expected to report a gross margin of 72.61% in fiscal 2020, a YoY rise of 25 basis points. Johnson & Johnson is also expected to report a gross margin of 72.72% in fiscal 2021, a YoY rise of 11 basis points.

Interest projections

Wall Street analysts expect Johnson & Johnson to report net interest expenses of $371.22 million in fiscal 2019, a YoY drop of 5.78%. The company is expected to report a net interest expense of $360.33 million in fiscal 2020, a YoY drop of 2.93%. Johnson & Johnson is also expected to report a net interest expense of $375.67 million in fiscal 2021, a YoY rise of 4.26%.

The company expects to report net interest expense in the range of $100 million to $200 million in fiscal 2019. The company expects to benefit from lower debt levels and higher interest income in fiscal 2019.

In the next article, we will discuss Johnson & Johnson’s SG&A and R&D expenses for fiscal 2019 in greater detail.

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