Johnson & Johnson Faces Headwinds Despite Promising Growth Prospects
Johnson & Johnson (JNJ), based in New Brunswick, New Jersey, is an established player in healthcare. With a market cap of $366.3 billion, the company is divided into three main sectors: pharmaceuticals, medical devices, and consumer products.
Stock Performance and Market Comparison
Over the past year, JNJ’s stock has struggled, dropping 3%, while the S&P 500 Index ($SPX) experienced a substantial gain of 20.9%. On a year-to-date basis, however, the stock has risen by 5%, surpassing the S&P 500’s more modest rise of 1.9%.
When looking specifically at the Health Care Select Sector SPDR Fund (XLV), JNJ’s performance has been below average as well, lagging behind its 3.8% return over the past year, and its 7.2% growth year-to-date.
Challenges Impacting Performance
JNJ’s recent difficulties stem from multiple issues. Sales in its MedTech segment have slowed down, especially in China. The expiration of the patent for its successful drug Stelara and over 62,000 ongoing talc-related legal cases have added to the challenges. Despite these setbacks, on January 13, the company’s stock rose 1.7% after announcing plans to acquire Intra-Cellular Therapies for $14.6 billion. This move aims to enhance JNJ’s pipeline and support its neurological business.
However, shares fell by 1.9% on January 22 after the company released its fourth-quarter earnings. While adjusted earnings of $2.04 per share and revenues of $22.5 billion exceeded expectations—showing a 5.3% year-over-year revenue increase—the downturn in earnings by 10.9% was disappointing. Strong sales growth in its Innovative Medicines unit, particularly from the drug Darzalex, was overshadowed by decreased revenues from key medications, including Stelara and Imbruvica. Investor disappointment was further fueled by lower-than-expected fiscal 2025 sales guidance, predicting revenues between $89.2 billion and $90 billion.
Future Outlook
Looking ahead, analysts anticipate that JNJ’s earnings per share (EPS) will grow by 6% year-over-year, reaching $10.58 for the fiscal year ending in December 2025. The company has shown a strong record of surpassing Wall Street estimates in its last four earnings releases.
Among the 22 analysts covering JNJ, there is a consensus rating of “Moderate Buy.” This includes eight “Strong Buy,” two “Moderate Buy,” and 12 “Hold” ratings, indicating a slightly more positive outlook than three months ago, when only seven analysts advised a “Strong Buy.”
Price Targets and Analyst Ratings
On February 3, Jefferies maintained a “Neutral” rating for JNJ while raising its price target to $166, suggesting a potential upside of 9.3% based on current prices. The average target of $169.45 forecasts an 11.6% increase, while the highest target of $190 indicates significant upside potential of 25.1%.
On the date of publication, Neharika Jain did not hold any positions in the securities mentioned in this article. All information and data in this article are for informational purposes only. For more details, please refer to the Barchart Disclosure Policy here.
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