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.
