Johnson & Johnson (NYSE:JNJ) is a name that I continue to be bullish on long-term as a dividend growth name. I mean this is not going to make you a millionaire overnight, but it grows the dividend and has delivered capital gains since I have been following it. Ultimately, it will help pad your retirement or save for your children's education. It is a name that most of you have products from in your home. On top of that the company continues to grow earnings. As a stock, I feel I can never go wrong recommending it. It just continues to chug along, paying its sizable and consistently growing dividend. It is just one of the most reliable companies you can invest in
This is the reality and that is why I got behind it. It is a stable, slow growing, safe play. For those on the sidelines, you have to pick your spots. The market gives you opportunities to get long the name on dips and when it does, you have to seize the opportunity. Of course, the name has rallied hard in the last 6 months, so it's time to wait for another pullback. And when it does pullback there is almost always a wave of big buys into the name. The name is a bit pricey here, but I have said many times that when the stock was $100 it was a buy. Well were up 30% from there but should you be holding? Well, the company just reported Q2 earnings that have caught my attention this morning.
So how did the company do? The company's most recent quarter saw sales of $18.5 billion. This was a slight uptick in sales of 3.9% year-over-year. I was pleased that this figure beat estimates slightly by $500 million. This is especially true when like many other domestic U.S. companies, the changes in currency year-over-year are having a negative impact on the absolute numbers. That fact is that businesses with a lot of international business are hurting from the stronger dollar. Taken independently, operational sales results increased 5.3% and the negative impact of currency was 1.4%.
On an absolute basis, domestic sales increased 7.4%, while international sales were up just 0.4%. Why? Well, this perceived weakness in international sales reflects actual operational growth of 3.1%, which is strong but also a negative currency impact of 2.7%. I have to point out that Johnson & Johnson is one of the harder hit companies by negative currency impacts, but the magnitude of the currency impacts is decreasing each quarter. But the company itself continues to chug along. On an operational basis, worldwide sales increased 7.9%, domestic sales increased 8.8% and international sales increased 6.9%. This excludes the impacts of acquisitions and sales over the last year.
Taking into account the company's operational expenses and sales data, the company saw net earnings come in at $4.0 billion. Taking into account the existing number of shares this translates to net earnings per share of $1.43. After taking into account special items, adjusted net earnings were $4.9 billion and adjusted earnings per share were $1.74. The adjusted earnings per share rose 1.8% over last year. The $1.74 in adjusted earnings represented a year-over-year increase and this beat analyst estimates by $0.06. The company continues to deliver. Alex Gorsky, chairman and CEO, said:
"We continue to see good momentum through the first half of 2016, delivering solid results in the second quarter, supported by strong underlying growth across our enterprise. We saw notable strength in our Pharmaceuticals business due to the continued success of new products, and also achieved significant clinical milestones, advancing our robust pipeline. In our Consumer business, we are executing strategic portfolio decisions to expand our market leadership in key segments, and in Medical Devices, we are continuing to accelerate our growth driven by new product launches and transforming our commercial models."
It doesn't matter where the company has been, it matters where it is going, especially when we are considering an investment in the name. The good news here is that the company revised upward its 2016 full-year guidance for sales of $71.5 billion to $72.2 billion, up from $71.2 billion to $71.9 billion. This, of course, reflects expected operational growth in the range of 2.5% to 3.5% and operational sales growth is expected to be in the range of 4.5% to 6.0%. Factoring in expected expenditures, adjusted earnings guidance for full-year 2016 was also revised upward to $6.63 to $6.73 per share, up from $6.53 to $6.68 per share. That is stellar. The company is continuing to invest heavily in its pipeline. I continue to love this stock but I would wait for a pullback before buying.
Note from the author: Christopher F. Davis has been a leading contributor with Seeking Alpha since early 2012. If you like his material and want to see more, scroll to the top of the article and hit "follow." He also writes a lot of "breaking" articles that are time sensitive. If you would like to be among the first to be updated, be sure to check the box for "Real-time alerts on this author" under "Follow."
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.