Johnson & Johnson (JNJ) is settling claims it contributed to the U.S. opioid epidemic and benefitting from the potential for a new round of Covid boosters. Today, JNJ stock is narrowly within a buy zone.
The opioid deal is part of a sweeping $26 billion settlement also involving drug distribution giants AmerisourceBergen (ABC), Cardinal Health (CAH) and McKesson (MCK). Johnson & Johnson is on the hook for $5 billion. The company has also announced separate deals with New York, Texas, Nevada, New Mexico and several tribes.
Also this month, Johnson & Johnson stock sparked after Pfizer (PFE) with its partner, BioNTech (BNTX), and Moderna (MRNA) asked the Food and Drug Administration to authorize another round of Covid booster shots.
J&J expects $3 billion to $3.5 billion in full-year sales of its Covid shot. The guide came during a mixed fourth-quarter report in which sales missed forecasts, but earnings topped by a penny. But U.S. officials have said they prefer the messenger RNA shots from Pfizer and Moderna.
In other news, the company is separating its consumer health division into a new company. This will allow J&J to focus on high-growth products, including its drugs and medical devices. In 2021, those units generated more than $79 billion in sales.
So, all things considered, is JNJ stock now a buy?
JNJ Stock: Earnings Beat Forecasts
During the fourth quarter, J&J earned $2.13 per share on $24.8 billion in sales. Adjusted profit rose close to 15% and sales advanced 10%. But the quarter was mixed with sales coming in light. Still, Covid vaccine sales proved strong. The Covid vaccine brought in $1.62 billion.
As a result, the company now expects $3 billion to $3.5 billion in sales of its vaccine this year.
Overall, the best growth came from Johnson & Johnson’s medical devices segment where sales popped close to 18% on a reported basis. Drug sales advanced more than 14% and consumer health sales rose more than 4%.
But JNJ stock didn’t meet the bar for CAN SLIM investors. Investors are encouraged to seek stocks with recent earnings and sales growth of 20%-25%.
In the current quarter, analysts call for adjusted earnings of $2.56 per share, down 3 cents year over year. Sales are expected to inch ahead 7.3% to $23.94 billion. Neither metric would meet CAN SLIM guidance.
Expectations For 2022
In 2021, Johnson & Johnson brought in $93.78 billion in sales, popping close to 14%. The company also reported adjusted profit of $9.80 per share, surging 22%.
Johnson & Johnson expects to earn $10.40-$10.60 per share, minus some items, in 2022. That would represent an increase of 6.1%-8.2%. The company also called for $98.9 billion to $100.4 billion in full-year sales, including $3 billion to $3.5 billion in Covid vaccine sales. Sales would rise 5.5%-7%.
For the year, JNJ stock analysts call for adjusted profit of $10.57 per share on $100.39 billion in sales, up a respective 7.9% and 7.1%.
Johnson & Johnson Technical Analysis
Shares of J&J have an Investor’s Business Daily Composite Rating of 86 out of a best-possible 99. The CR scores a stock’s key growth metrics against all other stocks regardless of industry group. So in terms of key growth measures, JNJ stock outranks 86% of all stocks.
(Related: Does your favorite stock get a pass or fail rating from IBD Digital?)
J&J stock has an IBD Relative Strength Rating of 79. The RS Rating measures a stock’s 12-month performance on a 1-99 scale against all other stocks. Most big winners have an RS Rating of 80 or higher before they break out on major price runs. This puts J&J shares just behind leading stocks.
Opioids And Baby Powder
Johnson & Johnson was under pressure for several years as opioid cases and claims that its talc-based baby powder led some users to develop cancer. But the company is working through those litigation claims.
In late February, J&J agreed to pay $5 billion to settle lawsuits claiming the company had a part in the nation’s opioid epidemic. Distributors AmerisourceBergen, Cardinal Health and McKesson will pay the remaining $21 billion of the sweeping deal.
The deal has been in the works for several years, but J&J says there’s now sufficient participation among plaintiffs to sign onto the deal.
On the talcum powder issue, J&J recently spun the business into its own company. That company immediately filed for bankruptcy. Before that, J&J pulled its baby powder brand from shelves in the U.S. and Canada. The move, J&J said, helped shift more resources to its Covid vaccine.
JNJ Stock News: Covid Booster Authorized
Johnson & Johnson’s single-shot vaccine gained authorization in the U.S. in February 2021. The FDA also authorized a booster shot at least two months following the first. Further, the FDA gave its blessing to allow for mixing and matching vaccine boosters.
The CDC also signed off booster shots from Pfizer and Moderna, as well as the mix-and-match strategy.
In the U.S., a booster shot of J&J’s vaccine at two months was 94% protective against symptomatic moderate-to-severe Covid at least two months following the second shot. It was 75% effective abroad. Further, a booster shot at six months eventually increased antibody levels by 12-fold.
But the FDA added a warning to the label for J&J’s shot regarding the potential for Guillain-Barre syndrome. The immune condition has occurred in 100 recipients of the J&J vaccine out of 12.5 million doses. Of those, 95 cases required hospitalization and one person died.
J&J stock was also rocked in October and November on positive results from antiviral pills from Merck (MRK) with partner Ridgeback Biotherapeutics and Pfizer. Investors worried demand for the antiviral pills would lead to lower vaccinations.
Now, Johnson & Johnson says it’s planning to evaluate the shot against the omicron variant.
Is JNJ Stock A Buy Or A Sell?
Johnson & Johnson stock was a buy as of March 23. Shares have broken out of a double-bottom base and remain within the buy zone, which runs from 173.72-182.41. Bullishly, J&J stock has also topped its 50-day line.
The company’s fundamentals are improving, and litigation risk is starting to lessen.
Still, JNJ stock analysts don’t expect sales growth to meet CAN SLIM marks in the first quarter.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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