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Valued at a market cap of $395 billion, Johnson & Johnson (JNJ) operates in the healthcare sector, encompassing pharmaceuticals, medical devices, and consumer products. The New Brunswick, New Jersey-based company excels with its diversified business model, robust R&D investment, and global reach in various therapeutic and consumer health areas.
Shares of the healthcare juggernaut have underperformed the broader market over the past 52 weeks. JNJ has declined 4.6% during this period, contrasting with the S&P 500 Index's ($SPX) robust rally of 15.8%. In 2024, JNJ shares appreciated by 2.9%, yet the stock continued to lag behind SPX's 8.7% gain on a YTD basis.
Zooming in further, JNJ's performance trails behind the US Pharmaceuticals iShares ETF (IHE), which has recorded gains of 11.4% over the past 52 weeks and an 8.4% increase on a YTD basis.
Johnson & Johnson has underperformed due to intensifying competition in medical sales, leading to concerns about lower medical device prices and higher tax rates. In addition, the impending patent expiry for one of its top-selling drugs, Stelara, has added to investor apprehension.
However, the stock surged nearly 4% on Jul. 17 following a strong Q2 earnings report that exceeded analyst expectations, with sales hitting $22.4 billion and adjusted net income rising to $2.82 per share. Key drivers included a 5.5% increase in pharmaceutical sales, particularly from cancer drugs like Darzalex and Erleada, and a positive revision of the company's full-year guidance.
For the current fiscal year, ending in December, analysts expect JNJ's EPS to grow 1.5% year over year to $10.07. The company's earnings surprise history is promising. It topped the consensus estimates in all of the last four quarters.
The consensus rating among the 20 analysts covering the stock is a “Moderate Buy.” That’s based on six “Strong Buy” ratings, two “Moderate Buys,” and 12 “Holds.”
This configuration is slightly less bullish than three months before, with seven analysts suggesting a "Strong Buy."
On Jul. 23, Daiwa's analyst Narumi Nakagiri downgraded Johnson & Johnson to "Neutral" with a price target of $150, citing concerns about intensifying competition in medical sales, expected lower medical device prices, and higher tax rates.
The mean price target of $171.26 represents a premium of just 6.2% to JNJ's current levels. However, the Street-high price target of $215 implies a modest potential upside of 33.3% from the current price levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
