Johnson & Johnson:
Pegged to Outperform

Johnson & Johnson (JNJ) develops, manufactures, and sells a broad range of products in the healthcare field. It employs about 152,700 individuals and has a market capitalization of roughly $382 billion. Johnson & Johnson has been a component of the Dow Jones Industrial Average since 1997, notes Phillip M. Seligman a Value Line analyst.

Johnson & Johnson's continuing operations are performing well. With the finalization of the separation of its Consumer Health business in August, the company started reporting solely on its remaining segments.

In the third quarter, its Pharmaceutical segment, renamed Innovative Medicine, realized sales growth of 5.1% year over year after an 80 basis-point (bp) positive currency impact. Excluding COVID-19 vaccine sales, segment sales grew 8.2% on the continued strength of key drugs. MedTech sales rose 10.0%, with currency having a 40-bp negative impact, on global procedure growth, recently launched products, and the Abiomed acquisition (which added 460 bps). All told, J&J's reported global sales grew 6.8% after a 40 basis point positive impact from foreign exchange and share earnings rose 8.1% to $2.66.

As a result, management raised its 2023 sales outlook and now expects sales of $84.4 billion-$84.8 billion, up from the earlier call of $83.6 billion-$84.4 billion.

Assuming a wider operating margin based on cost control and selling relatively more-profitable items, the company’s view of adjusted earnings up 12.7%-13.3% to $10.07-$10.13 looks achievable.

The company provided preliminary perspectives for 2024. In Innovative Medicine, it sees continued strong growth from key brands and progress from newly launched products.

In MedTech, J&J also sees adoption of recently launched products. The segment will also advance its pipeline programs including innovations in pulse field ablation, Abiomed, and surgical robotics. Procedures are expected to continue at 2023's elevated pace.

The talc asbestos litigation may deter some investors. These shares, top-ranked for Safety, continue to offer good conservative appeal. They are pegged to outperform the broader market averages over the short and intermediate term. What’s more, the financially powerful outfit pays an above-average dividend yield (3.23%) and should have little trouble maintaining payouts even in the event of a recession. The 3 to 5-Year Target Price Range: $185.00 – 205.00.

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