J&J’s Earnings Are Tuesday. Watch for News on Spinoff, Talc Litigation

When Johnson & Johnson reports its earnings on Tuesday morning, one big question will be on investors’ minds: What’s going on with the plan to make the consumer-health business into a separate company?

Johnson & Johnson (ticker: JNJ) is the last of the big pharma conglomerates. As peers like Eli Lilly (LLY), Pfizer (PFE), and GSK ( GSK ) have stripped away all but their core biopharma businesses, Johnson & Johnson had stuck firm to the old model, combining a huge consumer-health business, a large medical-devices division, and a biopharma business.

That is supposed to end this year, when Johnson & Johnson splits off its consumer health division, which sells Tylenol and Band-Aids. The new, publicly traded company will be called Kenvue.

Johnson & Johnson hasn’t been clear about the timing of the separation. And Now, legal issues have raised some questions about the plan.

Litigation over claims that talc in the company’s baby powder products caused cancer has burst back into the spotlight. While Johnson & Johnson announced an $8.9 billion settlement agreement earlier this month, it isn’t at all clear that the litigation is over.

The company’s earnings release Tuesday morning, and a call with investors to follow at 8:30 Eastern time, could bring news about the Kenvue separation and on the talc litigation. Investors will also be looking for updates on Stelara, an anti-inflammatory medication that could face biosimilar competition beginning later this year.

Johnson & Johnson stock beat the market handily in 2022, climbing 3.3% while the S&P 500 dropped 19%, but they have performed less well so far this year. The stock is down 6.2% so far in 2023, while the S&P 500 is up 7.9%.

Analysts expect Johnson & Johnson to report earnings of $2.60 per share for the first quarter of 2023, according to FactSet, on sales of $23.6 billion.

Johnson & Johnson reports quarterly earnings before its big pharma peers, so its results are often seen as a bellwether for the sector. Investors will be looking for a reason to get back in the stocks: The S&P 500 Pharmaceuticals industry group is down 3.9% this year, while the Health Care Select Sector SPDR exchange-traded fund (XLV) is down 1.1%.