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Here's Why it is a Good Time to Buy J&J's (JNJ) Stock Now
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Johnson & Johnson’s (JNJ - Free Report) biggest strength is its diversified business model. It operates through pharmaceuticals, medical devices and consumer products divisions. J&J has 25 platforms with more than $1 billion in annual sales. Meanwhile, J&J has one of the largest R&D budgets among pharma companies.
In May 2023, J&J spun off its Consumer Health segment into a new publicly-traded company. This newly listed company called Kenvue (KVUE - Free Report) began trading on the New York Stock Exchange with effect from May 4.
J&J owns 89.6% of total outstanding shares of Kenvue’s common stock and is the majority shareholder. J&J has initiated an exchange offer for shares of Kenvue that it currently owns as the next step in the separation. J&J intends to split off at least 80.1% of the shares of Kenvue. The final exchange ratio is 8.0324 in the split-off of Kenvue. With the complete separation of the Consumer Health segment, J&J will become a two-sector company focused on Pharmaceutical and MedTech fields.
The stock has declined 2.4% so far this year compared with an increase of 8.1% for the industry.
Here we discuss a few reasons why J&J is a good stock to invest in
Strong Second-Quarter Results & Raised Guidance: J&J reported strong second-quarter results, beating estimates for earnings as well as sales.
Organically, excluding the impact of acquisitions and divestitures, sales rose 6.2% on an operational basis. The MedTech and Pharmaceuticals segments outperformed expectations. Pharmaceutical segment sales rose 3.1% year over year, while the MedTech segment rose 12.9%.
The company’s strong performance in the first half of the year led it to raise its financial guidance for the second time this year. J&J raised its revenue guidance to a range of $98.8 billion to $99.8 billion from $97.9 billion to $98.9 billion. The adjusted earnings per share guidance was raised from a range of $10.60-$10.70 to $10.70-$10.80.
Above-Market Performance of the Pharma Unit: J&J’s Pharma segment is performing above-market (excluding COVID vaccine) despite currency headwinds and the impact of biosimilar and generic competition on sales of some key drugs like Remicade and Zytiga. Pharmaceutical segment sales rose 6.8% in 2022 on an organic basis despite the coronavirus pandemic. In the first half of 2023, sales rose 5.6% on an organic basis. The sales increase is being led by its blockbuster drugs, Darzalex and Stelara and contribution from newer drugs, Erleada and Tremfya.
Meanwhile, other core products like Simponi/Simponi Aria and Invega Sustenna are also contributing to growth. J&J continues to expect its Pharmaceutical business to deliver market-leading adjusted operational sales growth in 2023 despite the macroeconomic challenges. Growth in 2023 is expected to be driven by existing products like Darzalex, Tremfya, Erleada, Invega Sustenna and Uptravi, and also continued uptake from new launches, including Spravato, Carvykti and Tecvayli.
J&J has a long-term goal of growing the Pharmaceutical unit into a $60 billion ($57 billion on a constant-currency basis) segment by 2025.
Improvement in MedTech Segment Sales: Sales in the MedTech segment were hurt due to a decline in elective surgical procedures during the pandemic years. However, sales have been improving since 2022 due to recovery in surgical procedures and the segment’s enhanced competitiveness from new product launches. In 2022, J&J bought Abiomed, strengthening MedTech’s presence in higher growth segments. With the acquisition of Abiomed, the MedTech segment now has 12 platforms with more than $1 billion in annual sales.
Rising Earnings Estimates: Estimates for J&J’s 2023 earnings per share have increased from $10.65 to $10.75 over the past 30 days. Estimates for 2024 have jumped from $11.10 per share to $11.29 in the same timeframe. J&J’s stock has declined 2.4% year to date.
J&J beat earnings expectations in all the trailing four quarters. The company delivered a four-quarter earnings surprise of 5.58%, on average.
Conclusion
J&J faces its share of macroeconomic headwinds like inflationary pressure and rising input costs, which are hurting margins. Headwinds like generic competition and pricing pressure continue. Though J&J has taken meaningful steps to resolve its talc and opioid litigation, uncertainty exists regarding the talc litigations.
Nonetheless, continued strong sales performance of pharmaceutical products like Darzalex, and the MedTech segment should provide top-line support. J&J is also making rapid progress with its pipeline and line extensions.
Another Stock to Consider
Another large drug stock worth considering is Novo Nordisk (NVO - Free Report) which has the same Zacks Rank as J&J.
Estimates for Novo Nordisk’s 2023 earnings per share have increased from $5.07 to $5.31 over the past 30 days. Estimates for 2024 have jumped from $5.95 per share to $6.18 in the same timeframe. Novo Nordisk’s stock has risen 36.4% year to date.
Novo Nordisk beat earnings expectations in two of the trailing four quarters while missing in one and meeting in one. The company delivered a four-quarter negative earnings surprise of 0.28%, on average.
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Here's Why it is a Good Time to Buy J&J's (JNJ) Stock Now
Johnson & Johnson’s (JNJ - Free Report) biggest strength is its diversified business model. It operates through pharmaceuticals, medical devices and consumer products divisions. J&J has 25 platforms with more than $1 billion in annual sales. Meanwhile, J&J has one of the largest R&D budgets among pharma companies.
In May 2023, J&J spun off its Consumer Health segment into a new publicly-traded company. This newly listed company called Kenvue (KVUE - Free Report) began trading on the New York Stock Exchange with effect from May 4.
J&J owns 89.6% of total outstanding shares of Kenvue’s common stock and is the majority shareholder. J&J has initiated an exchange offer for shares of Kenvue that it currently owns as the next step in the separation. J&J intends to split off at least 80.1% of the shares of Kenvue. The final exchange ratio is 8.0324 in the split-off of Kenvue. With the complete separation of the Consumer Health segment, J&J will become a two-sector company focused on Pharmaceutical and MedTech fields.
The stock has declined 2.4% so far this year compared with an increase of 8.1% for the industry.
Image Source: Zacks Investment Research
J&J has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Johnson & Johnson Price and Consensus
Johnson & Johnson price-consensus-chart | Johnson & Johnson Quote
Here we discuss a few reasons why J&J is a good stock to invest in
Strong Second-Quarter Results & Raised Guidance: J&J reported strong second-quarter results, beating estimates for earnings as well as sales.
Organically, excluding the impact of acquisitions and divestitures, sales rose 6.2% on an operational basis. The MedTech and Pharmaceuticals segments outperformed expectations. Pharmaceutical segment sales rose 3.1% year over year, while the MedTech segment rose 12.9%.
The company’s strong performance in the first half of the year led it to raise its financial guidance for the second time this year. J&J raised its revenue guidance to a range of $98.8 billion to $99.8 billion from $97.9 billion to $98.9 billion. The adjusted earnings per share guidance was raised from a range of $10.60-$10.70 to $10.70-$10.80.
Above-Market Performance of the Pharma Unit: J&J’s Pharma segment is performing above-market (excluding COVID vaccine) despite currency headwinds and the impact of biosimilar and generic competition on sales of some key drugs like Remicade and Zytiga. Pharmaceutical segment sales rose 6.8% in 2022 on an organic basis despite the coronavirus pandemic. In the first half of 2023, sales rose 5.6% on an organic basis. The sales increase is being led by its blockbuster drugs, Darzalex and Stelara and contribution from newer drugs, Erleada and Tremfya.
Meanwhile, other core products like Simponi/Simponi Aria and Invega Sustenna are also contributing to growth. J&J continues to expect its Pharmaceutical business to deliver market-leading adjusted operational sales growth in 2023 despite the macroeconomic challenges. Growth in 2023 is expected to be driven by existing products like Darzalex, Tremfya, Erleada, Invega Sustenna and Uptravi, and also continued uptake from new launches, including Spravato, Carvykti and Tecvayli.
J&J has a long-term goal of growing the Pharmaceutical unit into a $60 billion ($57 billion on a constant-currency basis) segment by 2025.
Improvement in MedTech Segment Sales: Sales in the MedTech segment were hurt due to a decline in elective surgical procedures during the pandemic years. However, sales have been improving since 2022 due to recovery in surgical procedures and the segment’s enhanced competitiveness from new product launches. In 2022, J&J bought Abiomed, strengthening MedTech’s presence in higher growth segments. With the acquisition of Abiomed, the MedTech segment now has 12 platforms with more than $1 billion in annual sales.
Rising Earnings Estimates: Estimates for J&J’s 2023 earnings per share have increased from $10.65 to $10.75 over the past 30 days. Estimates for 2024 have jumped from $11.10 per share to $11.29 in the same timeframe. J&J’s stock has declined 2.4% year to date.
J&J beat earnings expectations in all the trailing four quarters. The company delivered a four-quarter earnings surprise of 5.58%, on average.
Conclusion
J&J faces its share of macroeconomic headwinds like inflationary pressure and rising input costs, which are hurting margins. Headwinds like generic competition and pricing pressure continue. Though J&J has taken meaningful steps to resolve its talc and opioid litigation, uncertainty exists regarding the talc litigations.
Nonetheless, continued strong sales performance of pharmaceutical products like Darzalex, and the MedTech segment should provide top-line support. J&J is also making rapid progress with its pipeline and line extensions.
Another Stock to Consider
Another large drug stock worth considering is Novo Nordisk (NVO - Free Report) which has the same Zacks Rank as J&J.
Estimates for Novo Nordisk’s 2023 earnings per share have increased from $5.07 to $5.31 over the past 30 days. Estimates for 2024 have jumped from $5.95 per share to $6.18 in the same timeframe. Novo Nordisk’s stock has risen 36.4% year to date.
Novo Nordisk beat earnings expectations in two of the trailing four quarters while missing in one and meeting in one. The company delivered a four-quarter negative earnings surprise of 0.28%, on average.