Will Johnson & Johnson Stock See Higher Levels Post Q3?

JNJ: Johnson & Johnson logo
Johnson & Johnson

Johnson & Johnson stock (NYSE: JNJ) is scheduled to report its Q3 2022 results on Tuesday, October 18. 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, Erleada, and Tremfya. While we expect the company to navigate well over the latest quarter, our forecast indicates that JNJ stock has little room for growth, 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 Q3 2022 revenues to be around $23.7 billion, reflecting a 2% y-o-y growth. This compares with the $23.4 billion consensus estimate.
  • While the company’s pharmaceuticals business is expected to lead the growth, driven by market share gains for Darzalex, Erleada, and Tremfya, forex headwinds will likely weigh on its MedTech revenue growth.
  • J&J posted a 3% y-o-y sales growth in Q2 2022, as a 7% rise in pharmaceuticals was partly offset by a 1% fall each in MedTech and Consumer Healthcare sales.
  • 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 Q3 2022 adjusted earnings per share (EPS) is expected to be $2.56 per Trefis analysis, slightly above the consensus estimate of $2.52. This compares with the $2.60 EPS the company reported in Q3 2021.
  • J&J’s adjusted net income of $6.9 billion in Q2 2022 reflected a 4% y-o-y increase. This can be attributed to higher revenues and a 36 bps rise 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 $10.11 compared to $9.80 in 2021.

(3) JNJ stock has little room for growth

  • We estimate Johnson & Johnson’s Valuation to be $186 per share, which is 14% above the current market price of $163.
  • At its current levels, JNJ is trading at 16x forward expected earnings, compared to the last three-year average of 17x, implying that it has little room for growth.
  • That said, if the company reports upbeat Q3 results and provides an outlook better than the street estimates, the P/E multiple will likely 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 at how counter-intuitive the stock valuation is for IDEXX Laboratories vs. Entegris.

Given higher inflation and the Fed raising interest rates, JNJ has seen a fall of 5% this year. Can it drop more? 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 Oct 2022
MTD [1]
YTD [1]
Total [2]
 JNJ Return 0% -5% 41%
 S&P 500 Return 0% -25% 60%
 Trefis Multi-Strategy Portfolio 0% -26% 192%

[1] Month-to-date and year-to-date as of 10/13/2022
[2] Cumulative total returns since the end of 2016

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