Johnson & Johnson is set to announce first-quarter earnings Tuesday morning ahead of the market open.

Shares of the health products giant have underperformed the market in recent months. J&J’s












JNJ, +0.42%










 stock has gained 5.6% in the year to date, while the Dow Jones Industrial












DJIA, -0.12%










 has gained 13.2%. The S&P 500












SPX, -0.12%










 has notched 15.7% in gains.

Concerns over potential product liability shook investors’ confidence in December after Reuters reported that the company knew for decades that its talc baby powder had at times tested positive for small amounts of asbestos. Even before that, J&J was facing thousands of lawsuits over the safety of its talc-containing baby powder. In July, a jury awarded $4.7 billion in damages to 22 women and their families who blamed their cases of ovarian cancer on asbestos in J&J’s talc products, though the company is appealing the verdicts.

Investors are also concerned about generic competition for some of J&J’s drugs, such as anti-inflammatory drug Remicade and prostate-cancer drug Zytiga. In January, J&J said it expects such competition to reduce sales by $3 billion in 2019.

However, analysts at RBC Capital Markets said in a note last week that they believe the rest of the company’s historically strong international sales and strong drug roster should “more than offset” any erosion in those sales. They also noted J&J will soon have more sources of drug revenue, thanks to the FDA’s recent approvals of Spravato for major depressive disorder and Imbruvica as part of a combination therapy for chronic lymphocytic leukemia and small lymphocytic lymphoma. The company’s prostate cancer drug Erleada was also approved in the European Union to treat patients with non-metastatic prostate cancer that’s unresponsive to androgen depletion therapy.

Read: Johnson & Johnson will be the first drugmaker to list pill prices in TV ads

Also read: FDA approves first postpartum depression drug — it could help hundreds of thousands of new mothers

Here’s what Wall Street expects on Tuesday from J&J:

Earnings: Analysts expect J&J to report first-quarter earnings of $2.04 per share, slightly lower than the $2.06 per share posted in the year-earlier period, according to FactSet. J&J has surpassed the FactSet consensus in every quarter for the past five years.

The software platform Estimize, which crowdsources estimates from buy-side and sell-side analysts, hedge funds, academics and others, has the company earning $2.07.

Revenue: Analysts expect the company to report revenue of $19.61 billion, down from $20.01 billion in the year-earlier period, according to FactSet. J&J has beat FactSet expectations for revenue over the past six quarters.

Estimize has J&J reporting $19.83 billion.

Stock reaction: Shares of the health-products company have lagged behind the market in recent months. However, it has outperformed the Health Care Select Sector SPDR Fund ETF












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which has gained 3.83% in the year to date.

The average price target for the stock is $144.76, according to FactSet. Company shares were valued at $136 on Monday afternoon.

J&J has an average rating of overweight on FactSet. Ten analysts have a hold rating on the stock, while 9 have a buy or overweight rating and one has an underweight or sell rating.

What to watch for: J&J’s earnings are seen as a bellwether for many health sectors due to the company’s large range of products, which run the gamut from drugs to medical devices to consumer goods. Tuesday’s results will be an indication of what’s to come in the next few weeks as other health companies report their latest quarterly results.

Wall Street is still largely positive when it comes to J&J. Investors are paying too much attention to Johnson & Johnson’s legal issues and threats to the company’s generic and biosimilars business, analysts at Cowen wrote in a note to clients on Monday.

A strong first-quarter performance “should help investors gain increased optimism toward improving business trends throughout JNJ’s med-tech / consumer franchises and instill greater confidence in the pharma re-acceleration path in 2020,” Cowen analyst Joshua Jennings wrote.



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