Johnson & Johnson (NYSE:JNJ) stock is trading modestly higher in early trading after topping on both earnings and revenue in the fiscal first quarter.
The diversified pharmaceutical giant reported earnings of $1.56 per share, beating expectations by 3 cents; as for its top-line, JNJ’s $17.4 billion figure also exceeded the $17.3 billion consensus Wall Street projection.
It was a much-needed beat for Johnson & Johnson investors, who have watched in agony as their stock underperformed the benchmark S&P 500 Index by 10 percentage points in the past year alone.
The massive size of the company and the unparalleled strength of the U.S. dollar has been tough on JNJ stock, which relies on international sales for half of its total revenue.
Don’t Call It a Blowout
While Johnson & Johnson beat both top- and bottom-line numbers in the fiscal first quarter, don’t expect the JNJ stock price to soar on the news in the days to come. Company-wide revenue fell 4.1%, with most of the decline attributable to the international segment, which saw sales slump 12.4%.
The negative impact from currency headwinds in its international segment was a whopping 13.2%. Europe took the worst hit with European JNJ operations suffering a 17.6% setback; the Western Hemisphere (ex-U.S.) took a 13.2% impairment from unfavorable exchange rates, while the “Asia-Pacific, Africa” region saw 6.8% headwinds due to currency fluctuations.
This should give investors in other large multinationals a good idea of what’s to come. Like JNJ, other blue-chip stocks are also highly vulnerable to weakness in the eurozone and the strength of the dollar: Household names like The Coca-Cola Co (NYSE:KO), McDonald’s Corporation (NYSE:MCD) and Ford Motor Company (NYSE:F) each derive large chunks of their revenues from abroad.
InvestorPlace contributor Matt Thalman noted yesterday in an earnings preview for JNJ stock that the steady healthcare company with a 2.8% dividend wasn’t likely to beat estimates by much today, especially with the strong dollar weighing on results. Said Matt,
“JNJ is a very slow-moving, slow-growing company that isn’t going to shock the market with much higher than expected numbers. In the past four quarters, the biggest surprise was a mere 7% higher than the consensus estimate.”
Going forward, the outlook for JNJ stock isn’t a whole lot more exciting. In fact, management actually adjusted full-year EPS expectations, guiding for somewhere between $6.04 and $6.19 in fiscal 2015. If JNJ hits the mid-range of that guidance — let’s say it earns $6.12 per share in 2015 — its year-over-year EPS growth will clock in at a measly 2.5%. That kind of growth certainly won’t have Wall Street frothing at the mouth.
Luckily, investors can still turn to the company’s 2.8% dividend for some modestly boosted returns. But any gains beyond that will have to come from either multiple expansion or meaningful future earnings beats — two things that are awfully hard to come by.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
