Johnson & Johnson Q3 Sales Grow 1.7%, Upgrades 2020 Profit Forecast

Johnson & Johnson, one of the world’s largest and most comprehensive manufacturers of healthcare products, reported a 1.7% increase in the third-quarter sales to $21.1 billion on rising demand for its cancer drugs despite the estimated negative impact of the COVID-19 pandemic.

The company, which is well-known for consumer products like Band-Aids, said its EPS increased 101.5% to $1.33 in the third quarter of 2020 and adjusted EPS rose 3.8% to $2.20.

Johnson & Johnson forecast full-year 2020 adjusted profit between $7.95 to $8.05 per share, improved from its prior range of $7.75 to $7.95 per share.

Profit more than doubled to $3.55 billion in Q3, from a year earlier when the company had recorded “other expenses” of $4.21 billion. On an adjusted basis, the company earned $2.20 per share, beating analysts’ estimates of $1.98 per share, according to IBES data from Refinitiv, Reuters reported.

This comes just after the company said that it has paused clinical trials of its coronavirus vaccine candidate due to an unexplained illness in a study participant.

Johnson & Johnson’s shares fell about 2% to $149.15 in pre-market trading on Tuesday; however, the stock is up about 4% so far this year.

Executive comments

“Our third-quarter results reflect solid performance and positive trends across Johnson & Johnson, powered by better-than-expected procedure recovery in Medical Devices, growth in Consumer Health, and continued strength in Pharmaceuticals,” said Alex Gorsky, Chairman and Chief Executive Officer.

“Our world-class R&D team is working tirelessly to advance the Phase 3 trials of our COVID-19 vaccine and to uphold the highest standards of transparency, safety and efficacy; while other dedicated teams provide ongoing support to hospitals and patients as they return to sites of care, and ensure patients and consumers have the medicines and products they need. This resilient mindset, combined with our strategic capabilities and execution excellence, increase our optimism for continued recovery in 2020 and strong momentum entering into 2021.”

Johnson & Johnson stock forecast and analyst comments

Eight analysts forecast the average price in 12 months at $167.25 with a high forecast of $175.00 and a low forecast of $158.00. The average price target represents a 10.15% increase from the last price of $151.84. All those eight equity analysts rated “Buy”, none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley target price is $170 with a high of $204 under a bull scenario and $110 under the worst-case scenario. SVB Leerink reiterated an “outperform” rating on shares of Johnson & Johnson in July. Zacks Investment Research lowered shares of Johnson & Johnson from a “hold” rating to a “sell” rating and set a $150 price target. Stifel Nicolaus lowered from a “buy” rating to a “hold” rating. Bank of America reissued a “buy” rating. At last, Credit Suisse Group reissued a “buy” rating on shares of Johnson & Johnson in September.

“Litigation liability has been more than reflected in Johnson & Johnson (J&J) shares, in our view, creating a meaningful valuation disconnect vs. the S&P. Pharma-driven acceleration is poised to drive the multiple higher in 2020 led by blockbuster franchises, pipeline launches and easing comparables,” said Michael Cyprys, equity analyst at Morgan Stanley.

“Momentum in MD&D and Consumer segments should drive a more balanced growth profile which is less reliant on Pharma.”

Upside and Downside Risks

Upside: 1) Pharmaceutical growth accelerates to HSD sustainability. 2) Opioid and talc litigations are settled. 3) MD&D growth accelerates – highlighted by Morgan Stanley.

Downside: 1) Litigation overhang persists / legal liabilities are greater than anticipated. 2) Pharma pipeline is unable to offset biosimilar and competitive risks. 3) COVID-19 impact to MD&D is more severe. 4) Turnarounds in Consumer and MD&D fail to materialize or slower than expected.

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