Insights

Is Johnson & Johnson Stock a Buy Now?

Healthcare juggernaut Johnson & Johnson (NYSE: JNJ) has remained a favorite of dividend-focused investors. Its consistently outstanding performance every quarter, despite market volatility and macro-economic uncertainties, shows how well it handles its business. 
The cherry on top is that the company is a Dividend King, increasing dividends for 60 consecutive years. Let’s dive into its first-quarter results and determine why it is an excellent buy-and-hold stock.

Image source: Getty Images.

1. A diversified business

Johnson & Johnson’s popular brands Listerine, Neutrogena, Benadryl, and more remain customers’ favorites. However, the real secret behind JNJ’s consistent performance is the sheer level of diversity in its business operations, which are formally composed of three segments — consumer, pharmaceutical, and medical devices. During turbulent times these segments balanced each other out, bringing in consistent revenue. 
That said, JNJ recently made some changes to its business. To concentrate more on its core healthcare business, viz. the pharmaceutical and medical devices divisions, JNJ is in the process of spinning off its consumer healthcare segment into a new, publicly-traded company.
It also reclassified some international over-the-counter drugs from the pharmaceutical segment to a separate consumer health segment starting in the first quarter. Its medical devices segment is now renamed MedTech.
Some of the drugs from its pharmaceutical segment are widely popular in the market. That includes immunology drug Stelara, which saw a sales jump of 18% year over year internationally, bringing in a total of $2.3 billion in Q1. And Tremfya, a treatment for adults with moderate to severe plaque psoriasis, saw an impressive 44% year-over-year rise to over $590 million in sales for Q1.
Cancer drugs Darzalex and Erleada also added a combined $2.2 billion to total revenue in the year and showed an outstanding year-over-year increase depicting the rising demand. Darzalex, used to treat multiple myeloma, saw its U.S. sales jump 38% year over year. Erleada is used to treat prostate cancer; the drug’s U.S. sales rose by 20% from Q1 2021 levels.
The company’s neuro drug Invega Trinza, used for the treatment of schizophrenia in adults, brought in another $1 billion in revenue for the quarter. JNJ also generated $457 million in sales from its COVID-19 vaccine, Ad26.COV2.S, used for the prevention of the SARS-CoV-2 virus. 
2. Outstanding financials
Total reported sales for the first quarter grew 5% to $23.4 billion, with a 3% increase in earnings per share to $2.67. CEO Joaquin Duato said in the press release: “Our first-quarter results demonstrate strong performance across the enterprise, despite macro-economic headwinds.” 
Its pharmaceutical segment, which boasts a portfolio of quality drugs, contributed the highest of the three segments ($12.8 billion) to total sales, showing a 6.3% year-over-year increase. 
Its medical devices segment, which manufactures an array of products, from those used for joint reconstruction and trauma to sports medicine and biomaterials, saw a year-over-year increase of 6% to $7 billion in Q1.
Management stated that due to the uncertainty of demand and supply, JNJ has suspended guidance for COVID-19 vaccine sales.
Total reported sales are expected to be between $94.8 billion to $95.8 billion, slightly below its previous guidance of $95.9 billion to $96.9 billion. Adjusted earnings per share could also be around $10.15 to $10.35 instead of $10.40 to $10.60, as estimated earlier.
3. Its hard-earned “Dividend King” status

It is no surprise why the company earned the “Dividend King” title. Paying dividends consistently for 60 consecutive years reveals the strength of its business globally. 
Along with the results, JNJ also announced a hike in its quarterly dividend by 6.6%, to $1.13 per share. This marks the company’s 60th consecutive yearly dividend increase. 
The company’s efforts in growing its business through new innovative products and drugs are why I believe Johnson & Johnson is worth investing in. Its research and development expenses increased by 10% from the year-ago period to $3.4 billion in Q1. It also plans to compete with Intuitive Surgical in the robotic-assisted surgery segment. Intuitive has a monopoly in the segment with its state-of-the-art da Vinci robotic system. 
JNJ introduced its robot-assisted surgery system Ottava in November 2021. Management didn’t discuss much about this in the Q1 results. 
This is a safe healthcare stock for investors who want to see their money grow and also earn a regular income through dividends.
Sushree Mohanty has no position in any of the stocks mentioned. The Motley Fool owns and recommends Intuitive Surgical. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy. –

Healthcare juggernaut Johnson & Johnson (NYSE: JNJ) has remained a favorite of dividend-focused investors. Its consistently outstanding performance every quarter, despite market volatility and macro-economic uncertainties, shows how well it handles its business. 

The cherry on top is that the company is a Dividend King, increasing dividends for 60 consecutive years. Let’s dive into its first-quarter results and determine why it is an excellent buy-and-hold stock.

Image source: Getty Images.

1. A diversified business

Johnson & Johnson’s popular brands Listerine, Neutrogena, Benadryl, and more remain customers’ favorites. However, the real secret behind JNJ’s consistent performance is the sheer level of diversity in its business operations, which are formally composed of three segments — consumer, pharmaceutical, and medical devices. During turbulent times these segments balanced each other out, bringing in consistent revenue. 

That said, JNJ recently made some changes to its business. To concentrate more on its core healthcare business, viz. the pharmaceutical and medical devices divisions, JNJ is in the process of spinning off its consumer healthcare segment into a new, publicly-traded company.

It also reclassified some international over-the-counter drugs from the pharmaceutical segment to a separate consumer health segment starting in the first quarter. Its medical devices segment is now renamed MedTech.

Some of the drugs from its pharmaceutical segment are widely popular in the market. That includes immunology drug Stelara, which saw a sales jump of 18% year over year internationally, bringing in a total of $2.3 billion in Q1. And Tremfya, a treatment for adults with moderate to severe plaque psoriasis, saw an impressive 44% year-over-year rise to over $590 million in sales for Q1.

Cancer drugs Darzalex and Erleada also added a combined $2.2 billion to total revenue in the year and showed an outstanding year-over-year increase depicting the rising demand. Darzalex, used to treat multiple myeloma, saw its U.S. sales jump 38% year over year. Erleada is used to treat prostate cancer; the drug’s U.S. sales rose by 20% from Q1 2021 levels.

The company’s neuro drug Invega Trinza, used for the treatment of schizophrenia in adults, brought in another $1 billion in revenue for the quarter. JNJ also generated $457 million in sales from its COVID-19 vaccine, Ad26.COV2.S, used for the prevention of the SARS-CoV-2 virus. 

2. Outstanding financials

Total reported sales for the first quarter grew 5% to $23.4 billion, with a 3% increase in earnings per share to $2.67. CEO Joaquin Duato said in the press release: “Our first-quarter results demonstrate strong performance across the enterprise, despite macro-economic headwinds.” 

Its pharmaceutical segment, which boasts a portfolio of quality drugs, contributed the highest of the three segments ($12.8 billion) to total sales, showing a 6.3% year-over-year increase. 

Its medical devices segment, which manufactures an array of products, from those used for joint reconstruction and trauma to sports medicine and biomaterials, saw a year-over-year increase of 6% to $7 billion in Q1.

Management stated that due to the uncertainty of demand and supply, JNJ has suspended guidance for COVID-19 vaccine sales.

Total reported sales are expected to be between $94.8 billion to $95.8 billion, slightly below its previous guidance of $95.9 billion to $96.9 billion. Adjusted earnings per share could also be around $10.15 to $10.35 instead of $10.40 to $10.60, as estimated earlier.

3. Its hard-earned “Dividend King” status

It is no surprise why the company earned the “Dividend King” title. Paying dividends consistently for 60 consecutive years reveals the strength of its business globally. 

Along with the results, JNJ also announced a hike in its quarterly dividend by 6.6%, to $1.13 per share. This marks the company’s 60th consecutive yearly dividend increase. 

The company’s efforts in growing its business through new innovative products and drugs are why I believe Johnson & Johnson is worth investing in. Its research and development expenses increased by 10% from the year-ago period to $3.4 billion in Q1. It also plans to compete with Intuitive Surgical in the robotic-assisted surgery segment. Intuitive has a monopoly in the segment with its state-of-the-art da Vinci robotic system. 

JNJ introduced its robot-assisted surgery system Ottava in November 2021. Management didn’t discuss much about this in the Q1 results. 

This is a safe healthcare stock for investors who want to see their money grow and also earn a regular income through dividends.

Sushree Mohanty has no position in any of the stocks mentioned. The Motley Fool owns and recommends Intuitive Surgical. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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