Stock (Symbol) |
Johnson & Johnson (JNJ) |
Stock Price |
$140 |
Sector |
Healthcare |
Data is as of |
November 12, 2017 |
Expected to Report |
Jan 23 |
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) has embarked on a higher level of growth. J&J’s sales increased a whopping 10% last qtr, well above the 2% growth the company had 2 qtrs ago. And profits surged 13%, which is double the rate JNJ normally grows at. And at the heart of growth, is a weakening dollar, which actually helped sales 1% last qtr. Foreign exchange had 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. Now the USD is weaker. 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 I feel this core holding is worthy of a P/E of 19. Profits are expected to climb an average of 8% the next 4 qtrs, and since JNJ has beaten the street the last 9 qtrs I imagine 10% profit growth is in reach. That would be fantastic! 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. |
One Year Chart |
Nice profit growth along the bottom. Yes, some of the numbers are in red, but that’s because I like 10% profit growth out of my conservative stocks. Still, JNJ is a great stock when you add the Est. LTG of 7% with a yield of 3%. Estimates are for 9%, 9%, 9% and 5% profit growth the next 4 qtrs but I envision 10% growth for the next year. 10% growth out of JNJ with a P/E is 18 is a good deal. |
Fair Value |
My Fair Value is 19x earnings, but I think this stock could get a P/E between 20 and 22. I will probably up my Fair Value next qtr. Also, 2017 profit estimates have risen in the last four qtrs from $7.04 to $7.11, $7.18 and $7.28. I think a lot of that’s due to F/X. |
Bottom Line |
Johnson & Johnson is a fabulous stock for conservative investors, and with profit growth now on another level this stock is very timely right now. This stock makes for a fine core holding for retirees. During the last three qtrs JNJ has jumped from 26th to 14th and now 10th in my Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 10 of 32 |