Johnson & Johnson is the largest and most diverse medical corporation in the world. The firm is divided into three divisions: pharmaceuticals, medical equipment and diagnostics, and general-use medications (consumer). Pharmaceuticals and equipment groups account for over 80% of revenues and the majority of earnings. The Department of Medicines focuses on immunology, cancer, neurology, pulmonary medicine, cardiology, and metabolic illnesses. The orthopedics, surgical tools, vision care, and other minor fields are the emphasis of the device section. Baby care, beauty, dental care, over-the-counter drugs, and women’s health are the current consumer segments. Geographically, the United States accounts for slightly more than half of overall income.
TIKR
JNJ
PRICE
$165,67
TARGET PRICE
$164
UPSIDE
0,2%
S&P 500
4,149 (-0.05%)
WTI CRUDE
81,25 (+0.52%)
10Y UST
3,577 (-0.014%)
BITCOIN
$30,013 (+1.74%)
J&J’s well-diversified business generates long-term growth opportunities.
Business strategy & prospects
Johnson & Johnson is a big player in the healthcare industry. The firm has a varied revenue base, an expanding research pipeline, and extraordinary cash flow production, all of which contribute to a wide economic zone.
J&J is a market leader in multiple healthcare areas, including medical equipment, consumer products, and several pharmaceutical industries. The pharmaceutical segment, which accounts for about half of total sales, is home to numerous industry-leading medications, including immunological treatments Remicade, Stelara, and Tremfya, as well as cancer drugs Darzalex and Imbruvica. The medical devices business accounts for over a third of sales, and the company is a market leader in numerous categories, including orthopedics and Ethicon Endo-Surgery surgical instruments. The consumer division mostly avoids the remaining business areas, although the company wants to exit its consumer healthcare section in early 2023, allowing it to focus more on medications and devices.
New generation items emerge as a consequence of research and development. Many new hits have lately been released in the pharmaceutical industry. But, given J&J’s scale, it is vital to expand the number of major pharmaceuticals in late development to maintain long-term growth. In addition, the business has developed novel medical products such as revolutionary contact lenses, less invasive surgical instruments, and robotic instruments.
These businesses earn a lot of money. J&J’s Healthy Free Cash Flow (operating cash minus capital expenditures) exceeds 20% of sales volume. For the last half-century, the company has been able to raise its dividends due to strong cash creation, and experts predict this trend to continue. It also enables J&J to capitalize on acquisition possibilities that will move development.
The corporation is more protected from patent losses than other Big Pharma firms due to its diverse operational sectors and anticipated new products. Furthermore, unlike most of its competitors, J&J is facing a significant part of its short-term patent losses on difficult-to-find complex pharmaceuticals, which should hold down generic competition.
Bulls’ notes
- Because the majority of J&J’s short-term patent losses are for difficult-to-manufacture items, the level of general competition should be reduced.
- Different healthcare businesses can protect J&J from an economic crisis by providing a defensive growth opportunity with consistent and predictable dividend increases.
- Several of J&J’s important medications and pipeline pharmaceuticals include specialized drugs with great pricing superiority and market position, as well as lower regulatory approval barriers.
Bears’ notes
- J&J is relatively weak for its size, which might provide long-term challenges to growth.
- A lawsuit involving talcum powder and narcotic medicines might cost billions of dollars and cause management to be distracted.
- Some significant J&J medications are facing increased competition, which may reduce the pharma group’s growth pace.