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Johnson & Johnson and General Motors: Growth and Income Stocks
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Johnson & Johnson (JNJ - Free Report) currently holding a Zacks Rank #3 (Hold) reported earnings on July 17th where they beat both the Zacks consensus earnings and revenue estimates for the second consecutive quarter. The company saw sales growth in both the Medical Device and Pharmaceutical segments.
Traditionally, JNJ has been viewed as a defensive stock, but over the past two quarters, the company has posted organic sales growth of +4.3% (Q1), and +6.3% (Q2). After the most recent earnings report management increased its organic sales growth guidance for 2018. Currently management is expecting to see continued organic sales growth between 3.5-4.5% for FY 2018, well above FY 2017’s organic growth level of +2.4%.
For the second half of 2018, management expects to see sales growth to improve for both the Medical Device and Consumer business segments. On the downside, the Pharmaceutical segment is expected to see a bit of a slowdown in growth percentage due to tougher comps in the third and fourth quarters of the year. In the first half of 2018, the Pharma segment posted organic growth of +9.3%, well above the +1.4% growth in the first half of 2017.
Outside of a tougher comp issue, the Pharma segment is facing increased generic competition for a few of its drugs. Yet, the segment drugs for immunology and oncology are expected to be long term growth drivers. The Pharma segment will be aided by the recent acquisition of BeneVir Biophar Inc., who was a privately held biopharmaceutical company that developed oncolytic immunotherapies, and the new collaboration with Bristol-Meyers Squibb to work on thrombotic conditions. Overall, the slowdown in the Pharma segment is not too concerning to analyst as the company’s other drugs and divisions are expected to outperform in 2018 and into 2019.
Price and Earnings Consensus Graph
As you can see below, the stock price had been under some pressure since the beginning of the year, but the back to back earnings reports that showed impressive organic growth has caused the stock price to begin to bounce back.
Along with a strong pipeline of products and drugs, JNJ also pays a very nice +2.79% annual dividend yield. The company also has a massive share repurchase program that bought $4.4 billion worth of shares over the past 12 months.
General Motors (GM - Free Report) who currently holds a Zacks Rank #2 (Buy) rating, recently announced some key data; June auto sales increased by +5.7% YoY, and that in the second quarter 2018, that they sold 758,000 vehicles in the U.S. But the big news driving GM as of late has been its Cruise Autonomous Vehicle (AV) division.
Back in 2016, GM purchased the startup Cruise Automation for $1 billion, and at the time many analysts thought that GM significantly overpaid for this new technology. Towards the end of the first quarter 2018, Softbank’s Vison Fund invested $2.25 billion for a 20% stake in the segment. This brought the value from $1 billion to $11 billion.
Then a few days ago, RBC capital markets published a research report on the Cruise division where it stated that if GM can have 800,000 AV’s up and operational by 2030 that the value of the division would be near $43 billion. Given current production capabilities at GM, this amount of vehicles is very obtainable. Keep in mind that GM’s current market cap is just over $56 billion, this would represent an almost 50% increase in market cap within 12 years.
As you can see in the Price and Consensus graph below, GM’s stock price has been a bit volatile since the beginning of 2018, and this is almost completely due to the trade issues with the EU and China. On July 25th, President Trump is scheduled to meet with EU officials to discuss auto tariffs. Current expectations are that the tariff issues will be further delayed of resolved at the meeting. Further, the China trade war issues have begun to take a back seat as investor’s fears have been ebbing for the past week.
Along with the very positive long term outlook in the crossover, SUV, and Cruise segments, GM pays a very nice +2.8% annual dividend yield. GM reports Q2 18 earnings results on July 25th, before the market opens.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Johnson & Johnson and General Motors: Growth and Income Stocks
Johnson & Johnson (JNJ - Free Report) currently holding a Zacks Rank #3 (Hold) reported earnings on July 17th where they beat both the Zacks consensus earnings and revenue estimates for the second consecutive quarter. The company saw sales growth in both the Medical Device and Pharmaceutical segments.
Traditionally, JNJ has been viewed as a defensive stock, but over the past two quarters, the company has posted organic sales growth of +4.3% (Q1), and +6.3% (Q2). After the most recent earnings report management increased its organic sales growth guidance for 2018. Currently management is expecting to see continued organic sales growth between 3.5-4.5% for FY 2018, well above FY 2017’s organic growth level of +2.4%.
For the second half of 2018, management expects to see sales growth to improve for both the Medical Device and Consumer business segments. On the downside, the Pharmaceutical segment is expected to see a bit of a slowdown in growth percentage due to tougher comps in the third and fourth quarters of the year. In the first half of 2018, the Pharma segment posted organic growth of +9.3%, well above the +1.4% growth in the first half of 2017.
Outside of a tougher comp issue, the Pharma segment is facing increased generic competition for a few of its drugs. Yet, the segment drugs for immunology and oncology are expected to be long term growth drivers. The Pharma segment will be aided by the recent acquisition of BeneVir Biophar Inc., who was a privately held biopharmaceutical company that developed oncolytic immunotherapies, and the new collaboration with Bristol-Meyers Squibb to work on thrombotic conditions. Overall, the slowdown in the Pharma segment is not too concerning to analyst as the company’s other drugs and divisions are expected to outperform in 2018 and into 2019.
Price and Earnings Consensus Graph
As you can see below, the stock price had been under some pressure since the beginning of the year, but the back to back earnings reports that showed impressive organic growth has caused the stock price to begin to bounce back.
Johnson & Johnson Price and Consensus
Johnson & Johnson Price and Consensus | Johnson & Johnson Quote
Along with a strong pipeline of products and drugs, JNJ also pays a very nice +2.79% annual dividend yield. The company also has a massive share repurchase program that bought $4.4 billion worth of shares over the past 12 months.
General Motors (GM - Free Report) who currently holds a Zacks Rank #2 (Buy) rating, recently announced some key data; June auto sales increased by +5.7% YoY, and that in the second quarter 2018, that they sold 758,000 vehicles in the U.S. But the big news driving GM as of late has been its Cruise Autonomous Vehicle (AV) division.
Back in 2016, GM purchased the startup Cruise Automation for $1 billion, and at the time many analysts thought that GM significantly overpaid for this new technology. Towards the end of the first quarter 2018, Softbank’s Vison Fund invested $2.25 billion for a 20% stake in the segment. This brought the value from $1 billion to $11 billion.
Then a few days ago, RBC capital markets published a research report on the Cruise division where it stated that if GM can have 800,000 AV’s up and operational by 2030 that the value of the division would be near $43 billion. Given current production capabilities at GM, this amount of vehicles is very obtainable. Keep in mind that GM’s current market cap is just over $56 billion, this would represent an almost 50% increase in market cap within 12 years.
As you can see in the Price and Consensus graph below, GM’s stock price has been a bit volatile since the beginning of 2018, and this is almost completely due to the trade issues with the EU and China. On July 25th, President Trump is scheduled to meet with EU officials to discuss auto tariffs. Current expectations are that the tariff issues will be further delayed of resolved at the meeting. Further, the China trade war issues have begun to take a back seat as investor’s fears have been ebbing for the past week.
General Motors Company Price and Consensus
General Motors Company Price and Consensus | General Motors Company Quote
Along with the very positive long term outlook in the crossover, SUV, and Cruise segments, GM pays a very nice +2.8% annual dividend yield. GM reports Q2 18 earnings results on July 25th, before the market opens.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>