Jul 16, 2019

Health care hopes Q2 quells jittery market

Health care earnings season starts in earnest this week. Photo: Drew Angerer/Getty Images

Johnson & Johnson today kicks off second-quarter earnings for a health care industry that has been fighting Wall Street jitters despite record-level profits.

The big picture: Wall Street has low expectations for all of corporate America in Q2, but health care may be different. A lot of the industry isn't affected by the Trump administration's trade war with China, and all available data suggests health care spending is not meaningfully slowing down.

Driving the news: Johnson & Johnson faces unique situations, like Oklahoma's demand that the company pay $17.5 billion to settle its opioid case and a possible criminal probe into its baby powder.

  • While those types of cases affect future profits, Johnson & Johnson and other health care companies are raising prices and getting more people to use their products and services.
  • Most health care sectors are expected to increase earnings per share by at least 8% this year, although pharmaceuticals will come in at slower rates, according to FactSet estimates.
  • Health care, unlike technology and nonessential consumer goods, is less exposed to tariffs, and the industry gets reliable cash flows through taxpayer funding and workers' paychecks.

What we're watching: Health insurance companies.

  • They've combined with pharmacy benefit managers, putting them on pace to become bigger than the Big Tech stocks this year, and they have routinely registered higher-than-expected profits the past few years.
  • The GOP tax law and a hiatus to an Affordable Care Act tax have helped, and now insurers avoided a regulation that would've eliminated a source of drug revenue.
  • Health insurance "earnings have been exceptionally strong, and we expect 2Q19 earnings to continue on this path," Barclays analysts wrote in an investor note.

Go deeper: Follow along with our updated health care earnings tracker.

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Trump says he will campaign against Lisa Murkowski after her support for Mattis

Trump with Barr and Meadows outside St. John's Episcopal church in Washington, D.C. on June 1. Photo: Brendan Smialowski/AFP via Getty Images

President Trump tweeted on Thursday that he would endorse "any candidate" with a pulse who runs against Sen. Lisa Murkowski (R-Alaska).

Driving the news: Murkowski said on Thursday that she supported former defense secretary James Mattis' condemnation of Trump over his response to protests in the wake of George Floyd's killing. She described Mattis' statement as "true, honest, necessary and overdue," Politico's Andrew Desiderio reports.

8 hours ago - World

The president vs. the Pentagon

Trump visits Mattis and the Pentagon in 2018. Photo: Brendan Smialowski/AFP via Getty

Over the course of just a few hours, President Trump was rebuffed by the Secretary of Defense over his call for troops in the streets and accused by James Mattis, his former Pentagon chief, of trampling the Constitution for political gain.

Why it matters: Current and former leaders of the U.S. military are drawing a line over Trump's demand for a militarized response to the protests and unrest that have swept the country over the killing of George Floyd by police.

New York Times says Tom Cotton op-ed did not meet standards

Photo: Avalon/Universal Images Group via Getty Images)

A New York Times spokesperson said in a statement Thursday that the paper will be changing its editorial board processes after a Wednesday op-ed by Sen. Tom Cotton (R-Ark.), which called for President Trump to "send in the troops" in order to quell violent protests, failed to meet its standards.

Why it matters: The shift comes after Times employees began a coordinated movement on social media on Wednesday and Thursday that argued that publishing the op-ed put black staff in danger. Cotton wrote that Trump should invoke the Insurrection Act in order to deploy the U.S. military against rioters that have overwhelmed police forces in cities across the country.