Johnson & Johnson (JNJ) has been in business for more than 130 years. It is one of the world’s healthcare leaders. The company researches and develops, manufactures, and sells various products in the healthcare field worldwide. It operates through three segments — Consumer, Pharmaceutical, and Medical Devices. The Pharmaceutical segment is focused on five therapeutic areas — immunology, infectious diseases, neuroscience, oncology, and cardiovascular and metabolic diseases.
The company’s solid recovery in the third quarter (ended September 30, 2020) was driven by sales growth across all its segments. Its consumer health segment sales increased 1.3% year-over-year, driven by growth in over-the-counter products in the U.S. While its pharmaceutical segment sales increased 5% year-over-year, its medical devices segment sales increased 43.4% sequentially.
Over the past year, JNJ stock rallied 8.4% to close yesterday’s trading session at $157.89. The company’s one-shot coronavirus vaccine generated a promising immune response in early trials, but investors are eagerly awaiting its approval by the U.S. Food and Drug Administration (FDA).
JNJ’s market dominance and the positive outlook surrounding the possible authorization of its coronavirus vaccine have helped the stock earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates JNJ:
Trade Grade: A
JNJ is currently trading above its 50-day and 200-day moving averages of $152.87 and $148.29, respectively, indicating an uptrend. Moreover, JNJ has gained 6.4% over the past three months, reflecting short-term bullishness.
The company’s sales increased 15% sequentially to $21.08 billion for the third quarter ended September 30, 2020. The pharmaceutical segment, which accounted for 54.2% of the net sales, increased 5% year-over-year to $11.42 billion. Its non-GAAP net earnings increased 3.5% year-over-year to $5.87 billion, yielding EPS of $2.20, which increased 3.8% year-over-year.
On January 4, JNJ announced a cash dividend of $1.01 per share for the first quarter of 2021, payable on March 9. JNJ’s Janssen Pharmaceutical Companies announced on December 21the initiation of a rolling submission of its Biologics License Application (BLA) to the U.S. FDA for ciltacabtagene autoleuce (cilta-cel), for the treatment of adults with relapsed and/or refractory multiple myeloma.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers JNJ is well positioned. The stock is currently trading just 2.1% below its 52-week high of $161.32, which it hit on January 11.
The company’s net revenue grew at a CAGR of 2.8% over the past three years, while its EBITDA increased at a CAGR of 2.5% over the same period. Also, its EPS increased at a CAGR of 3.4% over the past three years. This can be attributed to the company’s continuous advancements in the healthcare space.
Peer Grade: A
JNJ is currently ranked #1 of 239 stocks in the Medical – Pharmaceuticals industry. Other popular stocks in the medical – pharmaceuticals group are Astrazeneca PLC (AZN), Novartis AG (NVS), and Pfizer, Inc. (PFE).
With an 8.4% gain, JNJ has comfortably beaten the returns of these popular industry participants over the past year. While AZN has gained 2.4% over the same period, NVS, and PFE have lost 0.4%, and 6.5%, respectively.
Industry Rank: B
The Medical – Pharmaceuticals industry is ranked #35 of the 123 StockNews.com industries. The companies in this industry manufacture and process pharmaceutical products in the treatment of health disorders and illnesses.
While some tech companies grew at an unprecedented rate in the past year, the health sector has also been gaining with people attaching more importance to their health amid the pandemic. Because companies in this industry have been innovating and delivering technological advancements, the industry is expected to witness greater demand in the upcoming months.
Overall POWR Rating: A (Strong Buy)
JNJ is rated “Strong Buy” due to its short- and long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.
As the world await the news of authorization of JNJ’s coronavirus vaccine, it is wise to bet on the shares of the world’s largest healthcare company to generate a healthy ROI.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for JNJ. It has an average broker rating of 1.47, indicating favorable analyst sentiment. Moreover, JNJ has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.
A consensus revenue estimate of $88.94 billion for 2021 represents an 8.7% increase year-over-year. Its EPS is expected to grow 12.2% in 2021, and at a rate of 4.3% per annum over the next five years.
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JNJ shares were trading at $161.09 per share on Thursday afternoon, up $3.20 (+2.03%). Year-to-date, JNJ has gained 2.36%, versus a 1.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…
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