Stock (Symbol) |
Johnson & Johnson (JNJ) |
Stock Price |
$132 |
Sector |
| Healthcare |
Data is as of |
| August 8, 2017 |
Expected to Report |
| Oct 18 |
Company Description |
 Johnson & Johnson is a holding company. The Company is engaged in the research and development, manufacture and sale of a range of products in the health care field. The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices. The Company’s subsidiaries operate 134 manufacturing facilities occupying approximately 21.5 million square feet of floor space. Source: Thomson Financial |
Sharek’s Take |
 Johnson & Johnson (JNJ) might be on the verge of delivering 10% profit growth, which would be an outstanding accomplishment. JNJ has delivered 6% annual profit growth during the past decade, and with the U.S. dollar weak right now, that could mean better results than the 7% growth Wall Street is expecting this year. Foreign exchange has taken a toll on JNJ’s profits. From 2012-2016 currency reduced sales by 2.7%, 1.6%, 1.9%, 7.5% and 1.3% respectively. With profits expected to climb 8% the next 4 qtrs, J&J could deliver 10% growth if the dollar remains weak and the company continues to beat the street as it has in the last 8 qtrs. Here’s JNJ’s segment breakdown:
J&J’s credo is “Business must make a sound profit” and JNJ has delivered profit growth every year since 1984. The company has a AAA rating from S&P, has increased its dividend every year since 1963, and yields a plump 3%. The stock has a P/E of 18, which is high by historical measures, but with the F/X wind at its back I think the stock could get a P/E of 20. My 2017 Fair Value is $144 and 2018’s is $155. J&J and Microsoft are two of the safest stocks in the world, and I consider JNJ a stock that can be held by conservative investors or trust accounts for generations. With the F/X headwind dying down this stock should remain timely over the next year. |
One Year Chart |
 JNJ delivered 5% profit growth last qtr on a 2% rise in sales. Sales were negatively impacted by 1% from currency. Profit beat analysts’ estimates of 3%. Note that’s a 2% beat, and with qtrly profit Estimates of 7%, 9%, 7% and 9% that 10% growth is in strinking distance. AND sales were STILL negatively hit by F/X by 1% last qtr. This stock has been timely for a while now, I feel that will continue. |
Fair Value |
 With interest rates low, stocks should have higher P/Es — especially those with fat dividends. My Fair Value on JNJ is a P/E of 20 which gives the stock maybe 10% upside this year including dividends. And maybe 20% or so upside in 2018. I think that’s great for such a safe stock. |
Bottom Line |
 Johnson & Johnson is a fabulous stock for conservative investors. During the past decade the stock’s climbed 8% a year while delivering a 3% yield. Double digit total return in one of the safest stocks in the world. And now as profit growth could be 10% the next 4 qtrs I expect the stock to stay strong during the next 12 months. JNJ jumps from 26th to 14th in my Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 14 of 32 |
