Johnson & Johnson (JNJ) looks like it may need to take some Motrin to stave of the public-relations headache it’s facing. Oh wait … maybe that’s not such a good idea. Motrin is the problem.
It turns out Johnson & Johnson learned about some problems with its Motrin formulas in November 2008. But instead of issuing a recall and letting the public know of the problem, Johnson & Johnson hired an outside contractor to go around and collect samples to see if the company should issue a full recall. Oops.
To add insult to injury, the FDA reported it found 20 violations at a Johnson & Johnson plant in Ft. Washington, Pa. – forcing the plant to close until it can bring its operations back up to code.
If you want to see how investors are reacting to the news, all you have to do is look at the Dow Jones Industrial Average. Johnson & Johnson is the only member of the 30 stocks that make up the Dow – which skyrocketed 2% higher right from the opening bell – that fell in early trading.
This is bad news for Johnson & Johnson’s stock price because, after breaking out of its uptrend earlier this month, the stock is currently sitting at support around $60 – a level that was initially established in the latter half of 2009. If the stock breaks down below this level, it will most likely not find support again until $55.
Looking ahead to next quarter’s earnings announcement, analysts expect Johnson & Johnson to earn $1.23 per share – which is 8 cents more than the company made during the same quarter last year.
Credit Suisse, the last firm to issue a rating on Johnson & Johnson, reiterated its position with a neutral rating and gave the stock a price target of $61.
Disclosure: Hansen does not own shares of the stocks discussed above. Positions can change without notice.
by Wade Hansen