Stock (Symbol) |
Johnson & Johnson (JNJ) |
Stock Price |
$129 |
Sector |
| Healthcare |
Data is as of |
| March 3, 2018 |
Expected to Report |
| Apr 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) continues to grow profits at an above average rate. I consider JNJ to be a 6% to 7% grower, profit wise. But during the last three years (2015-2017) profits have increased 9%, 9% and 8% respectively. 2018 looks like a good year as well, with 11% profit growth expected. Boosting results are a lower tax rate and lower US dollar. 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, and sales are better. 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 is also on a dip, due to litigation fear about its baby powder causing cancer. But just like the Tylenol scare, this too shall pass. JNJ has a P/E of 16, down from 18 last qtr. And with profits set to grow 11% this year (which includes a 2% positive impact from the nwe ax law) I feel the stock is worth 20x earnings estimates, which works out to $146 a share. 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. This is a great time to get mom and pop aboard the J&J train. |
One Year Chart |
 Profits rose 10% last qtr due to the help of currency fluctuations. Without that profits would have grown 6%. Analysts had estimated 9% profit growth for the qtr. Sales increased 12% but that was positively impacted by acquisitions (would have been 4%). 2018 profit estimates rose from $7.85 last qtr to $8.10 this qtr, and have increased in each of the last 4 qtrs. JNJ has also beaten the street the last 4 qtrs. Qtrly profit growth Estimates are for 9%, 12%, 7% and 16% growth the next 4 qtrs. |
Fair Value |
 My Fair Value comes down from 19x earnings last qtr to 18x this qtr. I’m lowering expectations a bit because I don’t think J&J can go on a 20% run higher this year. But I think it could do that by next year. |
Bottom Line |
 Johnson & Johnson is a fabulous stock for conservative investors, and with the stock more than 10% off its highs this is a great time to talk mom and pop into buying some J&J. Plus with profits expected to grow in the double-digits this year the stock should bounce back quickly. I think JNJ is down partially from the baby powder, but also because other healthcare stocks aren’t doing so well, and these are all part of ETFs. JNJ ranks 16th in my Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 16 of 35 |
