By Mackenzie Tatananni

Johnson & Johnson is scheduled to report its fiscal first-quarter earnings before markets open on Tuesday, but the company has bigger hurdles to clear than meeting Wall Street's expectations.

Analysts polled by FactSet are looking for adjusted earnings of $2.69 a share from sales of $21.6 billion, roughly flat from the prior year. While shares have lagged behind the S&P 500 for the past three years, J&J remains up 6.7% in 2025 versus the broader market's 8.1% decline.

Part of the appeal is J&J's resilience in the face of a potential recession. The company offers a diverse product portfolio and spans the pharmaceutical, biotechnology, and medical technology sectors. Shares have fallen 0.6% since President Donald Trump's tariff announcement on April 2, while the S&P 500 has fallen 4.7%.

But Johnson & Johnson has other problems. The company is dealing with lawsuits that stem from claims its talc-based baby powder, taken off the market in 2023, contained the carcinogen asbestos and was marketed without disclosing the risk to consumers.

The first lawsuit cropped up in 1999, when a woman alleged years of using the product led to her developing mesothelioma. It wasn't until 2020 that the company transitioned to a cornstarch formula.

Johnson & Johnson repeatedly sought to protect its assets by transferring the legal liability to a subsidiary and then having that unit file for bankruptcy protection. Just last month, a federal judge in Texas struck down the latest attempt.

Two separate cases were dismissed in New Jersey in 2023 after courts ruled that J&J's LTL Management subsidiary wasn't in financial distress and didn't qualify for bankruptcy protection.

In the latest ruling in March, a Texas judge determined that a different subsidiary, Red River Talc, didn't belong in Chapter 11 bankruptcy protection, clearing the way for plaintiffs to seek relief in state courts.

The company has vowed to return to the tort system to fight the "meritless talc claims." In a statement, J&J said the legal case was "premised on junk science and fueled by third party litigation financing including from foreign sovereign wealth funds."

The company also vowed to reverse around $7 billion of a previous litigation reserve, saying it had "no intent to settle or pay plaintiff lawyers on such meritless claims." Clearly, the fight is far from over.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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April 14, 2025 16:44 ET (20:44 GMT)

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