Record-high inflation, the Fed’s hawkish stance, geopolitical turbulence, and growing recession fears kept the stock market highly volatile last year. However, Johnson & Johnson (JNJ) has been able to survive the market turmoil due to the defensive nature of its business and solid fundamentals.

The company is committed to returning value to its shareholders through attractive dividends. JNJ has a record of raising the dividend for 60 consecutive years. It pays a $4.52 per share dividend annually, which translates to a 2.51% yield on the current price. Its four-year average dividend yield is 2.60%. Its dividend payouts have grown at a 5.9% CAGR over the past three years and a 6% CAGR over the past five years.

Healthcare giant JNJ reported better-than-expected results for the third quarter of 2022. The company’s EPS surpassed analyst estimates by 2.6%, and its revenue beat the consensus EPS estimate by 1.5%. CEO Joaquin Duato said, “Our third quarter performance demonstrates our continued strength and resilience across all three of our businesses.”

For the full-year 2022, JNJ expects its operational sales to come between $97.50 billion to $98 billion, while its adjusted operating EPS is expected to arrive between $10.70 and $10.75. Moreover, the company continues to advance its innovative portfolio and pipeline through strategic partnerships and acquisitions.

On December 22, 2022, JNJ completed the acquisition of Abiomed Inc. (ABMD), a world leader in breakthrough heart, lung, and kidney support technologies. Joaquin Duato said, “This acquisition marks another important step on Johnson & Johnson’s path to accelerating growth in our MedTech business and delivering innovative medical technologies to more people around the world.”

The stock has gained 3.8% over the past year to close the last trading session at $178.80. 

Here’s what could influence JNJ’s performance in the upcoming months:

Solid Financials

In the fiscal third quarter (ended September 2022), JNJ reported sales of $23.79 billion, a 1.9% increase year-over-year, while sales from the Pharmaceutical segment increased 2.6% from the year-ago value to $13.21 billion. 

The company’s net earnings rose 21.6% year-over-year to $4.46 billion. Also, its EPS grew 22.6% year-over-year to $1.68.

Favorable Analyst Estimates

Analysts expect JNJ’s revenue to increase 1.4% year-over-year to $95.04 billion in the fiscal year ended December 2022. The company’s EPS is expected to grow 2.5% year-over-year to $10.05 in the current year. Moreover, it surpassed the consensus EPS estimates in all four trailing quarters.

Furthermore, the company’s revenue and EPS for the fiscal year 2023 are expected to grow 2.7% and 3.2% year-over-year to $97.61 billion and $10.37, respectively.

High Profitability

In terms of the trailing-12-month gross profit margin, JNJ’s 67.52% is 22.7% higher than the 55.03% industry average. The stock’s trailing-12-month EBITDA margin of 33.33% is 794.7% higher than the industry average of 3.73%. Likewise, its 0.54% trailing-12-month asset turnover ratio is 60.4% higher than the industry average of 0.34%. 

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 26.45%, 14.81%, and 10.94% compare to the negative industry averages of 39.73%, 21.95%, and 31.06%, respectively.

POWR Ratings Show Promise

JNJ has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. JNJ has a grade A for Stability. The stock’s beta of 0.34 justifies its Stability grade. In addition, it has a B grade for Quality, in sync with its higher-than-industry profitability metrics.

JNJ is ranked #4 out of 164 stocks in the Medical – Pharmaceuticals industry. Click here to access JNJ’s Growth, Momentum, Value, and Sentiment ratings.

Bottom Line

Healthcare giant JNJ’s revenue and net income have grown at CAGRs of 5.5% and 10.6% over the past three years, respectively. Moreover, analysts expect the company to keep growing its top and bottom-line numbers over the next two fiscal years.

The company is well-positioned to advance its innovative portfolio and pipeline through strategic partnerships and acquisitions. The recent acquisition of Abiomed will help it enter the high-growth cardiovascular space. Given its robust financials, high profitability, and stable dividend payments, JNJ could be an ideal buy for investors.

How Does Johnson & Johnson (JNJ) Stack up Against Its Peers?

JNJ has an overall POWR Rating of A. Check out these other stocks within the Medical – Pharmaceuticals industry with an A (Strong Buy) rating: Novo Nordisk A/S ADR (NVO), Pfizer Inc. (PFE), and Bristol-Myers Squibb Co. (BMY).

JNJ shares were unchanged in premarket trading Friday. Year-to-date, JNJ has gained 1.22%, versus a -0.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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