Insights

Why Johnson & Johnson Stock Held Steady in April

What happened
Shares of Johnson & Johnson (NYSE: JNJ) climbed a mere 1.82% in April, according to data from S&P Global Market Intelligence. At another time, that would be cause for alarm, but after a month in which the S&P 500 index dropped 8.8% and the iShares US Pharmaceuticals ETF dropped 3.32%, Johnson & Johnson’s steadiness is worth noting.
The healthcare stock closed March out at $177.23 a share, rising to as high as $186.69 on April 25, its 52-week zenith. It ended the month at $180.46. So far this year, the stock is up more than 8%.
Image source: Getty Images.

So what
How did Johnson & Johnson keep chugging when so many other stocks fell? The company’s financials have made it a safe haven. When the market drops, the company’s value becomes more evident, with a price-to-earnings (P/E) ratio of 23.95, well below the 45.69 average P/E in the pharmaceutical sector. Johnson & Johnson is a mature company, so you’re not going to see huge revenue growth from it, but its annual revenue has increased for six consecutive years.
Then there’s the company’s dividend, which it just raised 6.6% in April to $1.13 a share, the 60th consecutive year the Dividend King has boosted its dividend. That leaves it with a yield of 2.54 compared to the S&P 500 average dividend yield of 1.37.
In the first quarter, the company reported revenue of $23.4 billion, up 5% year over year. The company operates in three segments: consumer health, pharmaceutical, and medtech, and the only segment that was down, consumer health (by 1.5%), is going to be spun off by the company by November 2023. The company’s earnings per share (EPS) was a reported $1.93 in the quarter, down 16.7% over the same period in 2021, but the company reaffirmed its yearly guidance for operational revenue between $97.3 billion and $98.3 billion, representing a gain over 2021 of between 6.5% and 7.5%. It also maintained its operational EPS guidance for the year between $10.60 and $10.80, representing an increase of 8.2% to 10.2% over 2021.
The company’s medtech segment saw sales climb 5.9% over the same period in 2021, as more medical procedures were performed. Its pharmaceutical segment did even better; it was up 6.3%. On top of that, J&J announced two big drug approvals by the Food and Drug Administration (FDA) in the quarter. On Feb. 28, the company said that Carvykti (ciltacabtagene autoleucel) had been approved as a first-line therapy for patients with relapsed or refractory multiple myeloma, an incurable blood cancer that hits white blood cell plasma cells found in the bone marrow.
The second big announcement was on March 29 to say that Cabenuva (cabotegravir and rilpivirine) had been approved as a long-acting treatment for adolescents with HIV. That was after the FDA had expanded the label for Cabenuva, allowing it to be administered every two months to treat virologically suppressed adults with HIV.

IHE data by YCharts
Looking for solid footing
Investors have grown to count on Johnson & Johnson’s built-in diversity, with its three segments and huge size (144,000 employees). The company’s investors generally concentrate on the long term, not short-term stock swings, and the combination of steadily growing revenue and a consistent dividend should continue to buoy the stock, especially in choppy waters.
The company is moving to spin off its worst-performing segment, consumer health, and while that will take away some diversity, it gives the company the opportunity to have more growth in the long run.
Jim Halley has positions in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy. –

What happened

Shares of Johnson & Johnson (NYSE: JNJ) climbed a mere 1.82% in April, according to data from S&P Global Market Intelligence. At another time, that would be cause for alarm, but after a month in which the S&P 500 index dropped 8.8% and the iShares US Pharmaceuticals ETF dropped 3.32%, Johnson & Johnson’s steadiness is worth noting.

The healthcare stock closed March out at $177.23 a share, rising to as high as $186.69 on April 25, its 52-week zenith. It ended the month at $180.46. So far this year, the stock is up more than 8%.

Image source: Getty Images.

So what

How did Johnson & Johnson keep chugging when so many other stocks fell? The company’s financials have made it a safe haven. When the market drops, the company’s value becomes more evident, with a price-to-earnings (P/E) ratio of 23.95, well below the 45.69 average P/E in the pharmaceutical sector. Johnson & Johnson is a mature company, so you’re not going to see huge revenue growth from it, but its annual revenue has increased for six consecutive years.

Then there’s the company’s dividend, which it just raised 6.6% in April to $1.13 a share, the 60th consecutive year the Dividend King has boosted its dividend. That leaves it with a yield of 2.54 compared to the S&P 500 average dividend yield of 1.37.

In the first quarter, the company reported revenue of $23.4 billion, up 5% year over year. The company operates in three segments: consumer health, pharmaceutical, and medtech, and the only segment that was down, consumer health (by 1.5%), is going to be spun off by the company by November 2023. The company’s earnings per share (EPS) was a reported $1.93 in the quarter, down 16.7% over the same period in 2021, but the company reaffirmed its yearly guidance for operational revenue between $97.3 billion and $98.3 billion, representing a gain over 2021 of between 6.5% and 7.5%. It also maintained its operational EPS guidance for the year between $10.60 and $10.80, representing an increase of 8.2% to 10.2% over 2021.

The company’s medtech segment saw sales climb 5.9% over the same period in 2021, as more medical procedures were performed. Its pharmaceutical segment did even better; it was up 6.3%. On top of that, J&J announced two big drug approvals by the Food and Drug Administration (FDA) in the quarter. On Feb. 28, the company said that Carvykti (ciltacabtagene autoleucel) had been approved as a first-line therapy for patients with relapsed or refractory multiple myeloma, an incurable blood cancer that hits white blood cell plasma cells found in the bone marrow.

The second big announcement was on March 29 to say that Cabenuva (cabotegravir and rilpivirine) had been approved as a long-acting treatment for adolescents with HIV. That was after the FDA had expanded the label for Cabenuva, allowing it to be administered every two months to treat virologically suppressed adults with HIV.

IHE data by YCharts

Looking for solid footing

Investors have grown to count on Johnson & Johnson’s built-in diversity, with its three segments and huge size (144,000 employees). The company’s investors generally concentrate on the long term, not short-term stock swings, and the combination of steadily growing revenue and a consistent dividend should continue to buoy the stock, especially in choppy waters.

The company is moving to spin off its worst-performing segment, consumer health, and while that will take away some diversity, it gives the company the opportunity to have more growth in the long run.

Jim Halley has positions in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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