Dow component Johnson & Johnson (JNJ) is due to report third quarter 2020 earnings in Tuesday’s pre-market, with analysts expecting earnings per share (EPS) of $1.98 on revenue of $20.15 billion. The stock barely budged after the company beat second quarter estimates and raised guidance in July, and it is now trading just three points higher. More importantly, the stock has gone absolutely nowhere since recovering first quarter losses in April, stuck in a trading range between $135 and $155.

Key Takeaways

  • Johnson & Johnson is defending at least 19,000 baby powder lawsuits.
  • The stock has been stuck in a trading range for more than two and a half years.
  • Price action has recovered first quarter losses on weaker-than-expected buying volume.

The drug manufacturer has been a Dow laggard since topping out above $148 in January 2018, adding just four points between then and now. A generous dividend yield has eased shareholder pain while the company works through 19,000 lawsuits alleging illnesses caused by its talc-based baby powder. Bloomberg just reported that Johnson & Johnson will pay over $100 million to end over 1,000 legal actions, telling us that the company will be dealing with this headwind for years to come.

Johnson & Johnson is also developing a COVID-19 vaccine, reporting good results in a Phase 2 clinical trial in September. However, the CEO recently stated that a commercial vaccine isn’t likely until next year, even though competitors will be rushing their compounds to market to increase acceptance and profitability.┬áIt’s hard to tell if the tortoise or the hare will win this battle, given the high risk of rejection by a skeptical public.

Wall Street is showing little interest in the lawsuits, posting a “Strong Buy” rating on Johnson & Johnson shares based upon seven “Buy” ratings, with no