Johnson & Johnson (JNJ) is one of the world's largest pharmaceutical and medical device manufacturers, making it appealing because of its safety. Being a well-established pharmaceutical company, it could resist unfavorable headwinds.

Moreover, the high demand for pharmaceutical products owing to the increasing prevalence of disease, rapidly aging population, and increasing health expenditures is fueling the company's growth. The U.S. pharmacy market is projected to reach $861.67 billion by 2028, growing at a CAGR of 6.3%.

JNJ’s CEO and Chairman of the Board, Joaquin Duato, stated, "Our first quarter results demonstrate strong performance across all three segments of our business and reflect the dedication of Johnson & Johnson colleagues around the world.”

He added, “With this momentum, I look forward to the remainder of the year, one filled with exciting catalysts that will create both near- and long-term value for patients and all of our stakeholders."

Moreover, the company’s solid dividend payout history could make it a safe investment for investors fearing the effects of market volatility on their portfolios.

JNJ’s four-year average dividend yield is 2.62%, and its forward annual dividend of $4.76 translates to a 2.84% yield. Its dividend has grown at a 5.9% CAGR over the past three years. The company is expected to pay a quarterly dividend of $1.13 per share on September 7, 2023.

JNJ’s stock has gained 2.5% over the past six months to close its last trading session at $167.53. Wall Street analysts expect the stock to hit $183.20 in the near term, indicating a potential upside of 9.5%.

Let’s look at some factors that could influence JNJ’s performance in the upcoming months.

Robust Financials   

JNJ’s reported sales for the fiscal first quarter increased 5.6% year-over-year to $24.75 billion. The company’s gross profit increased 3.3% year-over-year to $16.35 billion. Moreover, its adjusted EPS came in at $2.68, representing a marginal increase over the prior-year quarter.  

Solid Historical Growth 

JNJ’s EBIT grew at a CAGR of 9.9% over the past three years. Its total assets grew at a CAGR of 8.1% over the past three years. Moreover, its revenue grew at a CAGR of 6.7% over the same time period. 

Discounted Valuation

In terms of forward non-GAAP P/E, JNJ’s 16.23x is 19.9% lower than the 20.26x industry average. Its 15.00x forward EV/EBIT is 12.7% lower than the 17.18x industry average. Likewise, its 13.39x forward EV/EBITDA is 3.1% lower than the 13.82x industry average.

High Profitability

In terms of the trailing-12-month EBITDA margin, JNJ’s 34.65% is 781.4% higher than the 3.93% industry average. Its 0.51x trailing-12-month asset turnover ratio is 45.2% higher than the 0.35x industry average. Likewise, its 67.17% trailing-12-month gross profit margin is 20.8% higher than the industry average of 55.58%.

Favorable Analyst Estimates  

JNJ’s consensus EPS and revenue estimates of $10.75 and $100.05 billion for fiscal 2023 indicate 6% and 5.4% increases year-over-year, respectively. Its EPS for fiscal 2024 is expected to increase 4.9% year-over-year to $11.28, while its revenue is expected to increase 3.1% year-over-year to $103.13 billion.

Additionally, JNJ’s EPS and revenue estimates for the quarter ending September 30, 2023, are expected to increase 4.9% and 5.2% year-over-year to $2.68 and $25.02 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

POWR Ratings Show Promise  

It’s no surprise that JNJ has an overall A rating, equating to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories.

The stock has an A grade for Stability, in sync with its 60-month beta of 0.54. It also has a B for Growth and Value, consistent with its solid historical growth and discounted valuation.  

Within the Medical - Pharmaceuticals industry, JNJ is ranked #3 of 165 stocks.     

Click here to access the additional ratings of JNJ. 

Bottom Line     

With the current volatile market conditions, the company’s diversified business, steady dividend payouts, and lengthy history of profitable operations could make JNJ a solid investment.

Given the company’s robust financial performance, solid historical growth, high profitability, and favorable analyst estimates, the stock could offer stability in such times. 

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

While JNJ has an overall POWR Ratings grade of A, equating to a Strong Buy rating, one may also want to consider these other stocks within the Medical - Pharmaceuticals industry with an A (Strong Buy) or B (Buy) rating: Novo Nordisk A/S (NVO), AbbVie Inc. (ABBV), and Bristol-Myers Squibb Co. (BMY).

What To Do Next?

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JNJ shares were trading at $168.28 per share on Tuesday afternoon, up $0.75 (+0.45%). Year-to-date, JNJ has declined -3.33%, versus a 20.21% rise in the benchmark S&P 500 index during the same period.

Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.

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