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JNJ – Market expectations are for Uniform ROA to remain stable, but management may have concerns about revenue growth, market share, and R&D investments

May 21, 2021

  • Johnson & Johnson (JNJ:USA) currently trades near recent averages relative to UAFRS-based (Uniform) earnings, with a 16.9x Uniform P/E. At these levels, the market is pricing in expectations for profitability to remain stable, but management may have concerns about revenue growth, market share gains, and the potential of their R&D investments
  • Specifically, management may lack confidence in their ability to sustain growth in sequential net earnings, their electrophysiology (EP) business, and their international Oral Care and Baby Care businesses. Moreover, they may have concerns about the potential of their Medical Device business product launches, potential drug pricing reforms, and their vaccine’s efficacy rate. Furthermore, management may lack confidence in their ability to grow the Orthopedics business, gain market share in the Vision Care business, and maintain share growth in DARZALEX therapy lines. In addition, management may be overstating the potential of their R&D investments, their focus on immunology business growth opportunities, and the capabilities of the Monarch platform. Finally, management may lack confidence in their ability to expand in the digital surgery market and maintain margin improvements in the Consumer Health segment