Wells Fargo Says There Is a Risk Johnson & Johnson Leads Lower by Investing.com

Investing.com — Analysts at Wells Fargo warned that Johnson & Johnson (NYSE: ) could cut its 2024 earnings estimates when the company reports third-quarter results, despite expectations for steady sales growth .

In a note to clients, Wells Fargo pointed out that while JNJ’s sales growth target for 2024 is likely to remain intact, the company may revise down its earnings per share (EPS) guidance due to recent acquisitions.

“JNJ expects $0.24 EPS dilution from the V-Wave acquisition, which would lower its 2024 reported EPS guidance from $9.97-$10.07 to $9.73-9.83 USD, all else being equal,” Wells Fargo noted.

Analysts believe that if the V-Wave deal closes by the time JNJ reports Q3 earnings, the company will likely update its guidance accordingly.

However, they add that the potential cut could be partially offset by a lower foreign exchange (FX) headwind, which is now expected to have a neutral to slightly positive effect on EPS.

Wells Fargo forecasts Q3 EPS of $2.09, below the consensus estimate of $2.18, and notes that the consensus may not fully reflect the dilution from JNJ’s acquisition of Numab.

Their forecast includes an estimated $1.25 billion impact from ongoing research and development (IPR&D) related to the deal.

While guidance for sales growth is expected to remain intact, analysts warned that the weak performance of JNJ’s Vision Surgical business and the lingering impact of China’s anti-corruption policies could create headwinds to growth in the second half of 2024.

Finally, Wells Fargo stressed that investors should pay attention to updates on the ongoing talc litigation, which JNJ is seeking to resolve through voluntary pre-packaged bankruptcy.