By Mark Maurer and Dylan Tokar 

Economic uncertainty surrounding the coronavirus pandemic has made financial projections all but impossible for many finance chiefs.

Just ask Johnson & Johnson. The health-products company is gearing up to unveil full-year earnings guidance for 2020 on April 14.

"One thing I know for certain is we're going to be 100% precisely wrong, " Joseph Wolk, J&J's CFO, said in an interview.

Market volatility and economic uncertainty have prompted companies to adjust or withdraw quarterly or full-year guidance. FedEx Corp. and American Eagle Outfitters Inc. were among the businesses in the past week to withdraw guidance for reasons such as the unknown impact of store closures, reduced trade and government-mandated lockdowns.

"It's going to be very, very challenging for companies to maintain their guidance or revise it," said Josh Jennings, an analyst at Cowen & Co. "We're assuming a lot of companies will pull their guidance on the first-quarter call."

Forecasts are, by definition, a best guess. Which is why -- with so much volatility and uncertainty -- conveying the degree of variability in the guidance is important, Mr. Wolk said.

"It's a matter of being directionally correct and being very transparent and clear about our thought process and our assumptions as we look to extrapolate the year," he said. "If we can't do that in a very credible manner, then maybe we forego that."

J&J will consider what it has experienced in the first quarter and make projections based on the geographic path of the virus relative to its business, Mr. Wolk said.

"Having the breadth of products that we do, some will perform better, some worse," Mr. Wolk said. "Tends to balance each other out."

The New Brunswick, N.J.-based company could face uncertainty in its consumer-products business because it is more sensitive to economic conditions, said David Kaplan, an analyst at S&P Global Inc. Also affected: the company's medical-devices business, which sells products frequently used in elective medical procedures, he said. Health officials have asked hospitals to delay those kinds of procedures.

Sales of certain J&J products from brands such as Band-Aid, Neutrogena and Rogaine likely will soften as consumers prioritize buying more essential goods, analysts said.

J&J also has had to adapt to executing the financial close of a quarter with employees working remotely. The company expects that employees in some territories or small countries may not be able to get into the office to close on their quarter-end financials, but it has been working with external auditors to ensure they have a mutual understanding about materiality, Mr. Wolk said.

J&J ended its 2019 fiscal year with more than $17 billion in cash and cash equivalents, according to company filings. It is unlikely to make any short-term changes to its investment strategy, Mr. Wolk said, including with respect to clinical trials -- an essential step for rolling out new medicines and medical devices.

Given the strength of its balance sheet, the current economic environment may even work in the company's favor, allowing it to supplement or accelerate its development portfolio and pipeline, Mr. Wolk said.

"As this lingers on, that may be a good opportunity for us to strike deals that were maybe at an impasse, where now maybe there's less of an impasse because there's a need on the seller side," he said.

Write to Mark Maurer at mark.maurer@wsj.com and Dylan Tokar at dylan.tokar@wsj.com

 

(END) Dow Jones Newswires

March 23, 2020 20:00 ET (00:00 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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