Johnson & Johnson (NYSE: JNJ) is the biggest healthcare company in the U.S in terms of market value. But the stock has been losing value amid concerns around the company’s businesses. Investors are mainly concerned about J&J’s losing traction of its prostate cancer medicine Zytiga and rheumatoid arthritis drug Remicade amid problems of generic competition. Johnson & Johnson is also under pressure amid President Trump’s plans to lower drug prices and lawsuits against asbestos in JNJ’s talcum powder. But we believe these concerns are ephemeral and Johnson & Johnson stock is a long term buy.
Johnson & Johnson (NYSE: JNJ) beat estimates for the second quarter. The company saw growth in medical devices business amid a healthy trend in its vision care sales, including contacts and surgical products. J&J’s consumer division revenue also saw growth in the quarter. J&J pharmaceuticals segment, which takes in about half of the company’s revenue, experienced double digit growth of 19.9% in the second quarter of 2018. Overall, the company reported revenue of $20 billion, more than the Street’s estimate of $19.46 billion. The company also upped its full-year sales estimate to a range of $80.5 billion and $81.3 billion, compared to the previous estimates. The new estimate shows an operational growth of 4.5% to 5.5% and an lower favorable impact of currency. The company reiterated its adjusted earnings estimate to between $8.07 and $8.17 per share, which shows an operational growth of 6.8% to 9.6%.
Johnson & Johnson (NYSE: JNJ) stock looks cheap. As of July 17, the stocks price-to-earnings ratio of 15.35 times forward earnings estimates. Recently, Matrix Asset Advisors chief investment officer David Katz said that Johnson & Johnson is one of the attractive investment options for the future because it is undervalued.
Analysts are also bullish on J&J’s cancer division. The company’s oncology revenue in the first quarter increased by 42% to $2.4 billion.
Johnson & Johnson (NYSE: JNJ) is also paying a dividend of 2.9%, which is above the market average. In April, the company announced to increase its dividend by 7%.
Johnson & Johnson (NYSE: JNJ) pipeline is healthy and the company will push several drugs in the market with excellent growth potentials. Recently, the company announced to increase its R&D spending by 15%. The company said it will use proceeds from tax relaxations to invest about $30 billion in R&D and capital investments in the U.S. over the next four years.
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Author does not have investment in stock discussed in this article.