3 of our stocks, including J&J, report earnings this week. Here's what we'll be watching

Published Mon, Oct 17 20226:00 AM EDTUpdated Mon, Oct 17 20228:31 AM EDT

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

Three of our Club stocks are scheduled to report their latest quarterly results this week, led by pharma giant Johnson & Johnson (JNJ) on Tuesday morning. Procter & Gamble (PG) and Danaher (DHR) on deck the following two days. Here's how we're thinking about J & J, P & G and Danaher heading into their prints, along with Wall Street estimates provided by Refinitiv. In case you missed it: We covered some of the big-picture themes we're watching this earnings season, which began in earnest Friday with the results of major U.S. banks including Club stocks Morgan Stanley (MS), which missed its third quarter , and Wells Fargo (WFC), which beat estimates . Johnson & Johnson Set to report before the bell Tuesday Projected revenue: $23.36 billion for Q3 Projected EPS: $2.48 for Q3 Club thoughts: The strong U.S. dollar and inflation are likely to be two overhangs on Johnson & Johnson 's third quarter. The company gets about 50% of its revenues domestically. When reporting its second quarter, back in July , J & J took down its full-year profit outlook due to currency headwinds. The U.S. Dollar Index is even higher now than it was then. Nevertheless, we don't expect too many surprises in this report as J & J prepares to break itself up in two distinct, publicly traded firms next year — one with its consumer health brands such as Tylenol, Listerine and Band-Aid, and the other with its pharmaceutical and medical devices units. In late September, J & J announced that Kenvue would be the name of the standalone consumer health company. We like the breakup plan and think both separate companies will be attractive for their own reasons. Plus, J & J is a classic defensively oriented stock. While down around 3.5% year to date, that's not nearly as bad as the S & P 500 's decline of more than 23% in 2022. Procter & Gamble Set to report before the bell Wednesday Projected revenue: $20.35 billion for fiscal Q1 2023 Projected EPS: $1.55 for fiscal Q1 2023 Club thoughts: Similarly to J & J, the dollar's strength promises to also remain a thorn in the side of Procter & Gamble . That's because the consumer staples titan — behind such brands as Tide laundry detergent, Bounty paper towels and Crest toothpaste — gets more than half its revenue outside overseas. Behind the U.S., its second-largest sales market is China, where economic growth has been challenged by Covid lockdowns. P & G has one of those weird fiscal years, so it'll be reporting first quarter 2023 results. We'll also be keyed into what management has to say about input costs. In recent quarters, they have pressured gross margins , but certain commodity and transportation costs have come down as of late. We think it's possible to see those longtime headwinds become a tailwind in the coming months. The reason is that P & G is unlikely to reverse the price hikes it put through to combat inflation. However, the challenges presented by the dollar, China and input costs are no secret to Wall Street, and many analysts have been bringing down their earnings estimates. P & G shares also are down more than 13% in the past three months, considerably underperforming the S & P 500 over that stretch, so investor expectations going into the quarter do not appear to be that bullish. We don't know when P & G will bottom, but in our minds they look closer to the floor than they do the ceiling; a dividend yield of nearly 3% at current prices also helps us be patient as we await for the turn in the stock. Danaher Set to report before the bell Thursday Projected revenue: $7.15 billion for Q3 Projected EPS: $2.26 for Q3 Club thoughts: We head into the earnings release knowing that, in mid-September, Danaher said its third-quarter revenue growth would be above its previously communicated guidance. Better-than-expected sales related to Covid testing played a key role in the strength. Importantly, it reaffirmed guidance for Q3 revenue growth in the high-single digit percentage range for its base business, which excludes Covid-related sales. The medical diagnostics and health technology firm last month also announced plans to separate its water-quality and product identification segment — known as Environmental & Applied Solutions (EAS) — into a publicly traded company. During last month's investor day , management discussed the planned EAS transaction, which is expected to close by the end of 2023. We'll see if there's any updated commentary on the matter during this week's post-earnings conference call. Shares of Danaher have dropped nearly 10% since the EAS separation and Q3 the revenue indication was announced. (Jim Cramer's Charitable Trust is long PG, DHR and JNJ. See here for a full list of the stocks.) 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The Johnson & Johnson logo is displayed outside the company's headquarters in New Brunswick, New Jersey, Aug. 1, 2020.

Mark Kauzlarich | Bloomberg | Getty Images

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