We recently compiled a list of the Jim Cramer is Talking About These 14 Stocks Before Earnings. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against the other stocks Jim Cramer is talking about before earnings.
As earnings season kicks off, Jim Cramer of Mad Money offered insights on what investors should watch in the coming week on Wall Street. He highlighted the anticipated reports from several major banks, along with a few other companies, as key events to monitor.
Cramer expressed optimism about the current market conditions, noting that the situation aligns with his previous predictions that the market would thrive once the Federal Reserve began reducing interest rates while the economy remained strong. He remarked on the spectacular earnings reported by some major banks on Friday, emphasizing that this positive news is particularly impactful now, as opposed to previous instances when the Fed was tightening, causing good news to go largely unnoticed. Cramer believes that with the Fed now supportive of the market, there is potential for more favorable times ahead.
Looking to Monday, Cramer predicted that the focus will shift away from earnings reports due to other significant developments over the weekend. He mentioned the anticipated unveiling of a Chinese stimulus package and noted that although the rally in China has stalled, it could regain momentum if the Chinese government injects substantial funds into real estate and the stock market.
“Now, on Monday, we won’t be focused on earnings. There’s a lot of other stuff happening over the weekend. For instance, I think we’ll be parsing the Chinese stimulus package that’s going to be unveiled. The China rally is stalled, but it can get rolling again if the Chinese Communist Party keeps throwing tens of billions of dollars for the stimulus at real estate, at the stock market.”
Cramer warned that the financial sector will face a significant test on Tuesday, as different banks will be reporting their earnings. Cramer reminded investors that we are just at the beginning of one of the year’s four reporting periods, which can be chaotic and open to various interpretations.
“We’re at the beginning of one of the year’s four reporting periods,” he said. “They’re jumbled. They’re open to a lot of interpretation. They’re fast. So listen to the calls, ponder a moment, and only then should you pull the trigger.”
Our Methodology
For this article, we compiled a list of 14 stocks that are slated to release earnings this week and were discussed by Cramer during his episode of Mad Money on October 11. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A smiling baby with an array of baby care products in the foreground.
Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 80
Johnson & Johnson (NYSE:JNJ) has been in hot water with lawsuits for a while now. Cramer discussed its talc-related losses and the pre-packaged bankruptcy. He explained:
“Johnson & Johnson caught a huge break in its talc losses this week. A federal judge has allowed a pre-packaged bankruptcy plan to contain the damages, and it’s being held in Texas, much more friendly than New Jersey, where a lot of people felt it might be. Is it the beginning of the end of J&J’s multi-year legal overhang? Could be. That means we can finally start focusing on earnings again. And when we get those earnings, especially for the pharma business, I actually think we’re going to like what we see.”
Johnson & Johnson (NYSE:JNJ) operates as a comprehensive healthcare company, engaging in the research, development, manufacturing, and sale of a diverse range of healthcare products. The company has been navigating significant legal challenges, facing lawsuits from over 62,000 claimants who allege that its talc products, including baby powder, were contaminated with asbestos and linked to ovarian cancer and other health issues.
In response to these claims, a subsidiary known as Red River Talc sought bankruptcy protection in a federal court in Houston, as part of a broader strategy to manage these legal liabilities. The company has consistently maintained that its products are safe and free from harmful contaminants. The healthcare giant is pursuing a proposed settlement of approximately $10 billion aimed at resolving these lawsuits.
However, this approach has met with resistance, as opponents of the settlement plan intend to challenge the bankruptcy proceedings, potentially seeking to have the case moved to New Jersey. This situation arises from the so-called “Texas two-step” strategy employed by the company, which involves transferring liabilities to a newly formed subsidiary that then files for Chapter 11 bankruptcy. It aims to consolidate all claims into a single settlement without necessitating that the company itself declare bankruptcy.
Despite these legal hurdles, Johnson & Johnson (NYSE:JNJ) concluded the latest quarter with a healthy cash position of $26 billion, indicating the company’s ability to address claims while maintaining liquidity for dividends and other financial commitments. Net sales for the second quarter reached $22.4 billion, which is a year-over-year increase of 4.3%. The company’s profits totaled $4.7 billion, driven by its portfolio of high-demand medical devices and pharmaceuticals that cater to critical healthcare needs.
Overall JNJ ranks 6th on our list of the stocks Jim Cramer is talking about before earnings. While we acknowledge the potential of JNJ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than JNJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.