Johnson & Johnson (NYSE: JNJ) recently reported its Q2 results, with revenues aligning and earnings exceeding estimates. The company reported revenue of $22.4 billion and adjusted earnings of $2.82 per share, compared to estimates of $22.5 billion and $2.72, respectively. In this note, we discuss Johnson & Johnson’s stock performance, key takeaways from its recent results, and valuation. JNJ stock has seen little change in recent years, moving slightly from levels of $155 in early January 2021 to around $155 now. JNJ underperformed the S&P 500 in 2021 and 2023, with returns of 9% and -11% respectively for the stock, compared to 27% and 24% for the S&P 500 in the same years.
Consistently beating the S&P 500 has been difficult for individual stocks in recent years, even for heavyweights in the Health Care sector and megacap stars. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Given the uncertain macroeconomic environment, could JNJ face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months? From a valuation perspective, JNJ stock looks like it has some room for growth, with an estimated valuation of $172 per share, reflecting around 10% upside from its current levels of $155. JNJ now expects its adjusted earnings per share for 2024 to be in the range of $9.97 and $10.07.
Johnson & Johnson’s revenue of $22.4 billion in Q2 was up 4.3% y-o-y. The company reported a 5.5% rise in Innovative Medicine and a 4.3% growth for its MedTech segment. Excluding the Covid-19 vaccine, pharmaceuticals sales grew 8.8% y-o-y, led by continued market share gains for several drugs. The growth in the MedTech segment can partly be attributed to the higher Electrophysiology sales and Abiomed acquisition. JNJ’s bottom line expanded 10.2% y-o-y to $2.82 on an adjusted basis. JNJ stock hasn’t seen any gains this year, underperforming the broader S&P500 Index, up around 17%.
Although JNJ faces some challenging macroeconomic factors, higher costs, and patent expiry for Stelara, much of these risks are already priced in. On the positive side, the company’s acquisition of Shockwave Medical will bolster its Cardiovascular sales, and market share gains for new drugs will drive growth for its pharmaceutical business. With JNJ stock trading at 15x forward earnings, there is room for growth from here. It is helpful to see how Johnson & Johnson’s peers fare on metrics that matter. Investors can find valuable comparisons for companies across industries at Peer Comparisons. Johnson & Johnson remains a strong player in the healthcare industry, with potential for growth in the coming years.
