Jim Cramer is Talking About These 14 Stocks Before Earnings

6. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 80

Johnson & Johnson (NYSE:JNJ) has been in hot water with lawsuits for a while now. Cramer discussed its talc-related losses and the pre-packaged bankruptcy. He explained:

“Johnson & Johnson caught a huge break in its talc losses this week. A federal judge has allowed a pre-packaged bankruptcy plan to contain the damages, and it’s being held in Texas, much more friendly than New Jersey, where a lot of people felt it might be. Is it the beginning of the end of J&J’s multi-year legal overhang? Could be. That means we can finally start focusing on earnings again. And when we get those earnings, especially for the pharma business, I actually think we’re going to like what we see.”

Johnson & Johnson (NYSE:JNJ) operates as a comprehensive healthcare company, engaging in the research, development, manufacturing, and sale of a diverse range of healthcare products. The company has been navigating significant legal challenges, facing lawsuits from over 62,000 claimants who allege that its talc products, including baby powder, were contaminated with asbestos and linked to ovarian cancer and other health issues.

In response to these claims, a subsidiary known as Red River Talc sought bankruptcy protection in a federal court in Houston, as part of a broader strategy to manage these legal liabilities. The company has consistently maintained that its products are safe and free from harmful contaminants. The healthcare giant is pursuing a proposed settlement of approximately $10 billion aimed at resolving these lawsuits.

However, this approach has met with resistance, as opponents of the settlement plan intend to challenge the bankruptcy proceedings, potentially seeking to have the case moved to New Jersey. This situation arises from the so-called “Texas two-step” strategy employed by the company, which involves transferring liabilities to a newly formed subsidiary that then files for Chapter 11 bankruptcy. It aims to consolidate all claims into a single settlement without necessitating that the company itself declare bankruptcy.

Despite these legal hurdles, Johnson & Johnson (NYSE:JNJ) concluded the latest quarter with a healthy cash position of $26 billion, indicating the company’s ability to address claims while maintaining liquidity for dividends and other financial commitments. Net sales for the second quarter reached $22.4 billion, which is a year-over-year increase of 4.3%. The company’s profits totaled $4.7 billion, driven by its portfolio of high-demand medical devices and pharmaceuticals that cater to critical healthcare needs.