Johnson & Johnson Stock Is Likely To See Higher Levels In The Near Term

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Trefis
JNJ: Johnson & Johnson logo
JNJ
Johnson & Johnson

[Updated: Dec 16, 2021] J&J Stock Rise

The stock price of Johnson & Johnson (NYSE:JNJ) has outperformed the broader indices over the last month or so. While the S&P500 index has seen a rise of 1% over the last one month, JNJ stock is up around 5%. This also compares with a 19% rise for its peer, Pfizer, a 3% rise for Bristol Myers Squibb, and -10% returns for Merck. Johnson & Johnson last month announced its plans to spin-off its Consumer Health business into a separate listed company, a move expected to be a positive for the company with increased focus on its fast growing pharmaceuticals business.

The broader markets saw lower levels in recent weeks led by concerns over the new Covid-19 variant – Omicron – and its impact on the overall economic growth, and the healthcare sector. However, over the last week or so, some reports have emerged stating that the impact of Omicron on the overall economic growth may not be as profound as earlier anticipated. This resulted in a rebound in the broader markets, including JNJ stock. Recently, Pfizer announced that its antiviral pill for Covid-19 reduces the risk of hospitalization and death by nearly 90%, making it far more effective than the 30% efficacy figure for a similar pill from Merck. This also is the reason for the strong gains for PFE stock and negative returns for MRK stock as stated above.

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Furthermore, the Fed’s decision to hold rates for now and providing a roadmap of three hikes in 2022 has given some relief for the investors and it also resulted in a rally in the broader markets yesterday. Looking at JNJ stock, we find it attractive at its current levels. It will also be in focus today with the CDC advisers expected to meet today and weigh limits on Johnson & Johnson’s Covid-19 vaccine, after continued blood clot issues. Going by our Johnson & Johnson’s Valuation of $202 per share, based on EPS estimate of $9.81 and a P/E multiple of 21x in 2021, there is more than 15% upside from its current levels.

But what about the near term, given that JNJ stock has seen a rise of 5% in a month? Going by its historical performance, there is a high chance of a rise in JNJ stock over the next month. Out of 368 instances in the last ten years that JNJ stock saw a twenty-one day rise of 5% or more, 226 of them resulted in JNJ stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 226 out of 368, or a 61% chance of a rise in JNJ stock over the coming month. See our analysis on Johnson & Johnson Stock Chances of Rise for more details.

While JNJ stock may see higher levels going forward, it is helpful to see how its peers stack up. Check out Johnson & Johnson Stock Comparison With Peers to see how JNJ stock compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data

  • After moving 4.1% or more over a five-day period, the stock rose in the next five days on 54% of the occasions.
  • After moving 8.3% or more over a ten-day period, the stock rose in the next ten days on 58% of the occasions
  • After moving 4.7% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 61% of the occasions.

This pattern suggests that there are higher chances of a rise in JNJ stock over the next five days, and ten days as well as over the next month, implying that investors can buy JNJ stock despite the recent rise for gains in the near term.

Johnson & Johnson (JNJ) Stock Return (Recent) Comparison With Peers

  • Five-Day Return: PFE highest at 14.4%; RHHBY lowest at -2.6%
  • Ten-Day Return: ABBV highest at 12.4%; RHHBY lowest at 0.5%
  • Twenty-One Days Return: PFE highest at 18.4%; MRK lowest at -10.0%

Below you’ll find our previous coverage of the stock where you can track our view over time.

[Updated: Nov 15, 2021] J&J Split

Johnson & Johnson (NYSE:JNJ) recently announced its plans to spin-off its Consumer Health business into a separate listed company. The Consumer Healthcare business garnered $14.0 billon of sales in 2020, while the rest of J&J revenues were $68.5 billion ($45.6 billion in Pharmaceuticals and $23.0 billion in Medical Devices sales). Our dashboard on Johnson & Johnson Revenues offers more details on the company’s segments. J&J is not the first company to take such an initiative. Pharmaceutical giants Pfizer and Merck both over the recent years resorted to spin-offs of their less profitable businesses, while industrial giant General Electric recently announced its plans to split into three different companies to unlock shareholder value.

This move to split its Consumer Healthcare business appears to be a step in the right direction for J&J. The company’s earnings have been weighed down over the recent years due to its Consumer Healthcare business. The segment sales have hovered in the range of $13.5 billion and $14.5 billion for the better part of the last decade. Operating profit from the segment also hovered in a range of $2.0 and $2.5 billion between 2011 and 2019, before plunging to an operating loss of $1.1 billion in 2020, owing to litigation expenses of  $3.9 billion for its talc related products.

Although the company has taken multiple initiatives, including the Dr. CI. LABO acquisition in 2019, and ongoing portfolio optimization, to strengthen its Consumer Healthcare business, the margins have been much lower than the company’s other businesses. The average operating margin for the Consumer Healthcare business between 2016 and 2020 stood at 12.2%, compared to 30.9% for Pharmaceuticals and 20.0% for the Medical Devices business. Now, after the split, the Consumer Healthcare business will have its own management, while J&J will focus on its more profitable segments – Pharmaceuticals and Medical Devices. Overall, this move is largely a positive for the company, unlocking more value for shareholders, and JNJ stock will likely see higher levels in the near term, in our view.

While JNJ stock may see higher levels going forward, it is helpful to see how its peers stack up. Check out Johnson & Johnson Stock Comparison With Peers to see how JNJ stock compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

 

[Updated: Oct 15, 2021] JNJ Q3 Earnings Preview

Johnson & Johnson stock (NYSE: JNJ) is scheduled to report its Q3 2021 results on Tuesday, October 19. We expect J&J to report revenues and earnings slightly above the consensus estimates. The pharmaceuticals sales will likely be driven by continued market share gains for its cancer drugs, Imbruvica and Darzalex, and immunology drugs, Stelara and Tremfya, along with increased contribution from its Covid-19 vaccine. The Medical Devices business is likely to see higher sales growth with a rise in total procedures volume. We expect the company to navigate well based on these trends over the latest quarter. Not only do we believe J&J will post Q3 results slightly above the street expectation, we find JNJ stock to be attractive at the current levels, and it is likely to rise post Q3 results. Our forecast indicates that J&J’s valuation is around $200 per share, which is 26% higher than the current market price of around $159. Our interactive dashboard analysis on Johnson & Johnson Pre-Earnings has additional details.

(1) Revenues expected to be in-line with the consensus estimates

Trefis estimates J&J’s Q3 2021 revenues to be around $23.75 billion, largely in-line with the consensus estimate of $23.74 billion. With over half of the U.S. population fully vaccinated, and on the international front the vaccination rate is rising gradually, total procedure volume is on a rise and this should augur well for J&J’s medical devices business in particular. An economic recovery also bodes well for the company’s Consumer Healthcare business. Looking at the pharmaceuticals business, the company’s three drugs – Stelara, Imbruvica,  and Darzalex – garnered $9.5 billion in sales in first half of 2021, or one-fifth of the company’s total revenues. These drugs will likely remain the key growth driver for J&J in Q3 as well. Our dashboard on Johnson & Johnson Revenues offers more details on the company’s segments.

2) EPS likely to be above the consensus estimates

J&J’s Q3 2021 adjusted earnings per share (EPS) is expected to be $2.42 per Trefis analysis, slightly above the consensus estimate of $2.36. J&J’s adjusted net income of $6.6 billion in Q2 2021 reflected a 49% y-o-y increase. This can be attributed to over 400 bps rise in net margins. As the company sees a rebound in sales, the margins are expected to improve, especially for its Medical Devices and Consumer Healthcare business, bolstering the overall earnings growth in 2021. For the full-year 2021, we expect the adjusted EPS to be higher at $9.74 compared to $8.03 in 2020. However, there can be near term margin pressure due to inflationary headwinds and supply chain constraints. Also, since the Covid-19 vaccine is being sold on a not-for-profit basis, this will impact the overall pharmaceuticals margin.

(3) Stock price estimate higher than the current market price

Going by our Johnson & Johnson’s Valuation, with an EPS estimate of around $9.74 and a P/E multiple of around 21x in 2021, this translates into a price of $200, which is 26% above the current market price of around $159. At current levels of $159, JNJ stock is trading at 16x its expected EPS of $9.74 in 2021, compared to levels of 20x seen as recently as late 2020, implying there is more room for growth for JNJ stock.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

 

[Updated: Sep 15, 2021] JNJ Stock Decline

The stock price of Johnson & Johnson (NYSE: JNJ) reached its all-time high of around $180 just last month before a recent sell-off in pharmaceutical stocks resulted in JNJ falling to $165 levels currently. Last month, we discussed that based on historical performance, there were higher chances of a decline in JNJ stock over the next month. However, the recent decline can be attributed to rising concerns over the Biden’s administration’s plan to reduce healthcare costs, including negotiating the drug prices in its Medicare program. But will JNJ stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent?

According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for JNJ stock average 4% in the next one-month (twenty-one trading days) period after experiencing a 4% drop over the previous week (five trading days). But how would the returns fare if you are interested in holding JNJ stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Johnson & Johnson stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF JNJ stock moved by -5% over five trading days, THEN over the next twenty-one trading days JNJ stock moves an average of 6%, with a good 73% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of Johnson & Johnson Stock Movements:

Question 1: Is the average return for Johnson & Johnson stock higher after a drop?

Answer: Consider two situations,

Case 1: Johnson & Johnson stock drops by -5% or more in a week

Case 2: Johnson & Johnson stock rises by 5% or more in a week

Is the average return for Johnson & Johnson stock higher over the subsequent month after Case 1 or Case 2?

JNJ stock fares better after Case 1, with an average return of 5.7% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.9% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Johnson & Johnson stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Johnson & Johnson stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For JNJ stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Johnson & Johnson after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Johnson & Johnson stock by changing the inputs in the charts above.

 

[Updated: Aug 18, 2021] JNJ Stock Rise

The stock price of Johnson & Johnson (NYSE: JNJ) has seen a rise of over 7% over the last twenty-one trading days, and it is also up 15% year-to-date. Note that such a move for JNJ stock is uncommon, and it has occurred less than 90 times over the last 10 years. The company reported upbeat Q2 results and it continues to benefit from market share gains for some of its key drugs, including Imbruvica and Darzalex. Furthermore, a rebound in volume of elective surgeries performed has boded well for its medical devices business in the recent past, a trend expected to continue in the near term. The company also raised its full-year outlook, bolstering its stock price growth.

But now that JNJ stock has moved 7% over the last month, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of a decline in JNJ stock over the next month. Out of 88 instances in the last ten years that JNJ stock saw a twenty-one day rise of 7.5% or more, 51 of them resulted in JNJ stock falling over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 51 out of 88, or about a 58% chance of a decline in JNJ stock over the coming month. See our analysis on Johnson & Johnson Stock Chances of Decline for more details.

Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data

  • After moving 3.3% or more over a five-day period, the stock rose in the next five days on 53% of the occasions.
  • After moving 2.9% or more over a ten-day period, the stock rose in the next ten days on 54% of the occasions
  • After moving 7.5% or more over a twenty-one-day period, the stock rose in the next twenty-one days only on 42% of the occasions.

Predict average return on Johnson & Johnson (JNJ) Stock Return: AI Predicts JNJ Average and Excess Return After a Fall or Rise

Johnson & Johnson (JNJ) Stock Return (Recent) Comparison With Peers And S&P500

  • Five-Day Return: MRK highest at 4.8%; SPY lowest at 0.3%
  • Ten-Day Return: PFE highest at 10%; BMY lowest at -0.5%
  • Twenty-One Days Return: PFE highest at 26%; MRK lowest at 2.3%

 

While JNJ stock can see higher levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Pfizer vs Merck.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Dec 2021
MTD [1]
2021
YTD [1]
2017-21
Total [2]
 JNJ Return 5% 9% 49%
 S&P 500 Return 1% 26% 111%
 Trefis MS Portfolio Return 0% 45% 288%

[1] Month-to-date and year-to-date as of 12/16/2021
[2] Cumulative total returns since 2017

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