The Zacks Analyst Blog Highlights: Johnson & Johnson, Pfizer, Merck, Public Service Enterprise Group and Consolidated Edison

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Feb 23, 2012, 09:30 ET

CHICAGO, Feb. 23, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Johnson & Johnson (NYSE: JNJ), Pfizer (NYSE: PFE), Merck (NYSE: MRK), Public Service Enterprise Group (NYSE: PEG) and Consolidated Edison Inc. (NYSE: ED).

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Here are highlights from Wednesday's Analyst Blog:

J&J CEO Stepping Down

Johnson & Johnson (NYSE: JNJ) recently announced that Bill Weldon, its Chief Executive Officer (CEO), will be stepping down from his post. Mr. Weldon, however, will continue to serve as Chairman of the Board of Directors.

Weldon, CEO at Johnson & Johnson since 2002, will be replaced by Alex Gorsky, who currently holds the post of the Vice Chairman of the Company's Executive Committee. Gorsky is also responsible for the Medical Devices & Diagnostics Group, Global Supply Chain, Health Care Compliance & Privacy and Government Affairs & Policy.

The new CEO will take charge on April 26, 2012, the date of the company's annual shareholder meeting.

Besides Gorsky, another contender for the post of the CEO was Sheri S. McCoy. Sheri S. McCoy will continue in her role as Vice Chairman of the Executive Committee. She will continue to lead the Pharmaceuticals and Consumer Groups, and maintain responsibility for Information Technology.

Change Expected

The announcement did not come as a huge surprise. During a part of Weldon's tenure, Johnson & Johnson has been beleaguered by frequent product recalls, which affected the performance of its consumer segment. The company has been facing these issues since 2009. While US Consumer segment sales declined 6.7% in 2011 to $5.2 billion with US OTC/nutritional sales declining 22.9%, 2010 revenues were impacted by about $900 million due to the product-recall related issues. In addition to losing revenues, consumer trust in the company was also affected.

The company has been working on resolving the situation. However, just when it looked like the product recall situation was somewhat under control, Johnson & Johnson announced yet another recall (seven lots of Infants' Tylenol Oral Suspension, 1 oz. Grape distributed in the US) a few days back.

Neutral on Johnson & Johnson

We currently have a Neutral recommendation on Johnson & Johnson, which carries a Zacks #3 Rank (short-term Hold rating). In our view, the new CEO will have his or her hands full dealing with the product recall issues and regaining consumer confidence.

Other companies that announced a change at the helm in the recent past include Pfizer (NYSE: PFE) and Merck (NYSE: MRK).

PEG Steady Biz Boosts Dividend

Public Service Enterprise Group (NYSE: PEG) has increased its dividend by 3.6%, bringing the annualized dividend to $1.42 per share from the previous payout of $1.37 per share. The company's strong balance sheet and cash flow generating abilities ensure a steady rise to the dividend.

The company will now pay a quarterly dividend of 35.5 cents per share compared with the prior quarterly dividend of 34.25 cents per share. The dividend will be paid on March 31, 2012, to shareholders of record at the close of business on March 9, 2012.

The company has been regularly paying dividends since 1907. The last quarterly dividend increase came in February 2010 with a 3% hike from 33.25 cents to 34.25 cents.

With the current dividend increase, the company revised its payout policy. It had earlier committed to pay 40% to 50% of its earnings as dividends. Now it plans to reward shareholders with a greater percentage of its income.

The company stated that contribution from its stable regulated business is steadily increasing, a trend that is expected to continue. Besides, progress on operational, capital investment and financial goals in 2011 would yield generous free cash flow, supporting future dividend growth.

The company's robust portfolio of regulated and non-regulated utility assets offers a steady earnings base and significant long-term growth prospects. Moreover, we believe that going forward the company's growth will be driven by a low-cost nuclear fleet, assumed rate relief and added generating capacities.

However, the increasing cost of coal, higher pension and financial costs, and power-price volatility are areas of concern. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Public Service Enterprise Group is expected to release its earnings tomorrow. The Zacks Consensus Estimates for fourth quarter and fiscal year 2011 are currently at 46 cents per share and $2.73 per share, respectively.

Recently its competitor, Consolidated Edison Inc. (NYSE: ED) reported fourth quarter and fiscal 2011 results. In the reported quarter, earnings from continuing operations came in at 74 cents, beating the Zacks Consensus Estimate of 71 cents. Results also compared favorably with earnings from continuing operations of 69 cents in the year-ago quarter.

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