Johnson & Johnson Shines

Johnson & Johnson (JNJ, $64.00, up $1.32) announced earnings on Tuesday which helped the stock extend its gains from Monday. The company reported earnings of $3.3 billion, or $1.17 a share, up from $2.6 billion, or $0.88, in the year-ago period. Revenue increased over 6% to $15.9 billion versus $15 billion on favorable currency exchange rates.

The 30% jump in 3Q profits are a little misleading because JNJ took a $745 million restructuring charge in the same quarter a year ago. Still, Wall Street was delighted with the news and sent the shares to a high of $67.48 shortly after the open.

Wall Street had expected earnings per share of $1.11 and revenue of $15.7 billion.

Although JNJ’s drug pipeline is a topic of concern, overall, these were solid numbers. In fact, the company raised full-year guidance and now expects earnings of $4.50-$4.53 a share, up from its previous guidance of $4.45-$4.50. The consumer products division continues to be JNJ’s bread-and-butter and there are seven to 10 new drugs coming to market by 2010. Although none are expected to be blockbusters, it shows JNJ is not resting on its laurels.

The November 60 calls (JNJKL, $6.00, up $1.30) opened at $6.90 and hit a high of $7.30. They have easily pretty much doubled from Monday’s opening price of $3.30

The April 70 calls (JNJDN, $2.75, up $0.75) are up from $1.50. They traded as high as $3.70 yesterday. Set stops accordingly.

Rick Rouse
Rick@Optionsmentoring.com
Click here for your free option trading package that includes a seminar CD and a free live options training class with our enrolled students.

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