Will Johnson & Johnson Stock See Higher Levels Post Q2?

JNJ: Johnson & Johnson logo
Johnson & Johnson

Johnson & Johnson stock (NYSE: JNJ) is scheduled to report its Q2 2022 results on Tuesday, July 19. We expect J&J to report revenues and earnings slightly above the consensus estimates. The company will likely see a steady rise in revenue led by continued market share gains for its drugs – Darzalex, Stelara, and Tremfya. While we expect the company to navigate well over the latest quarter, our forecast indicates that JNJ stock is fairly valued at its current levels, as discussed below. Our interactive dashboard analysis of Johnson & Johnson Earnings Preview has additional details.

(1) Revenue expected to beat the consensus estimate

  • Trefis estimates J&J’s Q2 2022 revenues to be around $24.0 billion, reflecting a 3% y-o-y growth. This compares with the $23.8 billion consensus estimate.
  • While J&J’s medical devices business faced headwinds during the pandemic, it has seen a rebound over the recent quarters. This trend likely continued in Q2 as well, with the total volume of the procedures rising. However, it will be a tough comparison to the prior-year quarter, which witnessed a strong rebound for the segment post-pandemic.
  • J&J posted 5% y-o-y sales growth in Q1 2022, as a 6% rise in pharmaceuticals and medical devices more than offset a 1.5% fall in consumer healthcare sales.
  • The pharmaceutical sales growth over the recent quarters has been led by market share gains for Stelara, Tremfya, and Darzalex, a trend expected to continue in the near term.
  • Our Johnson & Johnson Revenues dashboard offers more details on the company’s segments.
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(2) EPS likely to be slightly above the consensus estimates

  • J&J’s Q2 2022 adjusted earnings per share (EPS) is expected to be $2.59 per Trefis analysis, slightly above the consensus estimate of $2.57.
  • J&J’s adjusted net income of $7.1 billion in Q1 2022 reflected a 3% y-o-y increase. This can be attributed to higher revenues, partly offset by a 60 bps fall in net margins.
  • While the company sees continued sales growth, the operating margins are expected to face headwinds from inflationary pressure and increased marketing expenses.
  • Looking forward, for the full-year 2022, we expect the adjusted EPS to be higher at $10.30 compared to $9.80 in 2021.

(3) Stock price estimate 20% higher than the current market price

  • We estimate Johnson & Johnson’s Valuation to be $195 per share, which is only 9% above the current market price of $178.
  • This represents a forward P/EBITDA of 15x based on Johnson & Johnson’s EBITDA
  • That said, if the company reports upbeat Q2 results and provides an outlook better than the street estimates, it is likely that the P/EBITDA multiple will be revised upward, resulting in higher levels for JNJ stock.

While JNJ stock has only a little room for growth, it is helpful to see how Johnson & Johnson’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis 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 IDEXX Laboratories vs. Entegris.

Despite higher inflation and the Fed raising interest rates, JNJ has seen a rise of 4% this year. But can it drop from here? See how low Johnson & Johnson stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jul 2022
MTD [1]
YTD [1]
Total [2]
 JNJ Return 0% 4% 55%
 S&P 500 Return 2% -19% 72%
 Trefis Multi-Strategy Portfolio 3% -20% 213%

[1] Month-to-date and year-to-date as of 7/12/2022
[2] Cumulative total returns since the end of 2016

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