Johnson and Johnson (New York Stock Exchange: JNJ) has received some negative press lately, but will time heal its reputational wounds? I’m bullish on Johnson & Johnson stock, as the company’s financial guidance indicates an all-weather business that can survive its temporary challenges.
Headquartered in New Jersey, Johnson & Johnson offers healthcare products in its consumer, pharmaceutical and medical device segments. The company’s pharmaceuticals range from immunology, infectious diseases and vaccines to neuroscience, oncology, cardiovascular and more.
Yet everyone and their uncle seem to want to focus on Johnson & Johnson’s baby powder, not their high-conviction pharmaceuticals. That’s just fine, as market fear has only made JNJ shares cheaper, and value seekers should thank their lucky stars for the mistakes of overeager financial traders.
Johnson & Johnson Lawsuits: Don’t Be Swayed By Talc Talk
I can’t ignore the elephant in the room, so let’s talk about the ongoing litigation against Johnson & Johnson over the company’s baby powder and related products. This story concerns approximately 40,000 lawsuits allegedly linking Johnson & Johnson talc products to cancer.
A federal appeals court in Philadelphia, the US Court of Appeals for the Third Circuit, reportedly denied Johnson & Johnson’s request to use chapter 11 bankruptcy protection to stop those talc lawsuits. So it seems that the unusual company “Texas Two-Step” Legal Strategy it won’t stop Johnson & Johnson’s legal troubles.
Johnson & Johnson has already withdrawn its talc-based baby powder from the US market. Also, all of this will likely be resolved through financial settlements. JPMorgan (New York Stock Exchange: JPM) analyst Chris Schott, according to the Wall Street Journal, “estimates that J&J’s talc liabilities could end up in the range of $8 billion to $10 billion.” I hope Johnson & Johnson raises the prices of their products to pay for their legal troubles and eventually the reputational damage will lessen.
JNJ’s stock drop only makes it more attractive
JNJ shares took a 3.7% hit and landed exactly at $162 after Johnson & Johnson’s legal setback announcement. That’s good news for potential investors, as the stock is now near the bottom of its $155.72 to $186.69 annual range.
Too, Johnson & Johnson has a P/E ratio of 25x, which indicates a good value. In general, I like to see a P/E ratio below 30x, and when it’s 25x or less, that’s even better. Additionally, JNJ stock is ideal for security-conscious investors as its beta is an ultra-low 0.32, meaning the stock is non-volatile.
In addition, Johnson & Johnson has paid dividends for many years, and today the company pays an annual dividend yield of 2.65%. Johnson & Johnson’s next ex-dividend date is February 16, so consider owning some shares before that deadline.
JNJ’s win rate is good and his targeting is even better
If there’s one thing that can add more excitement to an earnings pace, it’s an optimistic outlook. By the fourth quarter of 2022, Johnson & Johnson beat Wall Street expectationsbut it’s also important to know that the company anticipates strong earnings growth for the current year.
In the fourth quarter of 2022, Johnson & Johnson’s adjusted EPS of $2.35 beat the analyst consensus estimate of $2.24. Remarkably, Johnson & Johnson has been consistently beating quarterly EPS expectations for years.
That’s great, but it only gets better when we take a look at Johnson & Johnson’s earnings guide. For the full year 2023, Johnson & Johnson models adjusted EPS from $10.45 to $10.65, with a midpoint estimate of $10.55. That’s above the median analyst estimate of $10.33 per share.
Clearly, Johnson & Johnson’s management isn’t overly concerned about the company’s financial future. Its ambitious 2023 EPS forecast suggests the company should be able to overcome its legal woes and continue to deliver outstanding value to customers and shareholders.
Are JNJ shares a buy, according to analysts?
Going back to Wall Street, JNJ’s stock is a Moderate Buy based on three Buy ratings and five Hold ratings. Average Johnson & Johnson Stock Price Target is at $185, implying 13.9% upside potential.
Conclusion: Should You Consider Johnson & Johnson Stock?
Johnson & Johnson stocks are known as defensive stocks, and for good reason. The company consistently beats Wall Street EPS forecasts, JNJ shares have a low beta and pay healthy dividends.
So, you don’t have to let the media headlines dissuade you from considering JNJ’s actions. It’s okay to consider holding some stocks long-term, as Johnson & Johnson management envisions a profitable 2023 despite perceived overall risk.
