For drugmaker and consumer products leader Johnson & Johnson (JNJ), the premarket proved unsettled ground after announcing quarterly earnings. Losses hit over 3% despite a mixed-bag report, but the losses ultimately reversed, and gains continued into Tuesday’s trading. The stock is now up over 3%.
I remain bullish on Johnson & Johnson; the company’s presence in COVID-19 fighting is sound on its own, but that’s barely the tip of the iceberg for Johnson & Johnson products.
The last year for Johnson & Johnson shares has been, overall, upward, though not without some losses along the way. The company started off last April struggling to stay above $160 per share. Today, the company stands at around $183 after a series of setbacks and recoveries.
The latest news, meanwhile, gave the company extra fodder to continue its latest upward trend. Johnson & Johnson posted its earnings report, which featured a beat on earnings, but a slight miss on revenue. The company posted $2.67 per share in earnings against $2.58 projected. However, for revenue, it posted only $23.4 billion against the $23.6 billion that Refinitiv analysts were looking for.
Wall Street’s Take
Turning to Wall Street, Johnson & Johnson has a Moderate Buy consensus rating. That’s based on six Buys and five Holds assigned in the past three months. The average Johnson & Johnson price target of $188.73 implies 3% upside potential.
Analyst price targets range from a low of $173 per share to a high of $215 per share.
A Mixed Bag of Supports for Johnson & Johnson Stock Ownership
Things get a little more complex taking a look at the current stock ownership of Johnson & Johnson. The TipRanks 13-F Tracker, for example, reveals that hedge fund involvement with the stock is on the rise and has been since April 2021 so far.
The increases commonly aren’t large, but their sheer regularity is perhaps the most surprising. This is also coming off a slight reduction in hedge fund ownership that took place between December 2020 and March 2021.
Meanwhile, insider trading at Johnson & Johnson suggests insiders are reconsidering their positions. Selling is the order of the day at Johnson & Johnson.
While January 2022 featured perfect parity between buyers and sellers at 26 transactions of either sort, selling has been the order of the day the rest of the time. November 2021 had one seller, and three sales transactions marked December 2021. February 2022 also saw three sales transactions take place.
Retail investors are also quite interested in Johnson & Johnson. Portfolios that held the stock were up 3.1% in the last 30 days, and up 0.8% just in the last week.
Johnson & Johnson’s dividend history, meanwhile, is just what income investors would like to see. The dividend has risen steadily and has done so over the past 59 years. In fact, the latest reports note that the company hiked its dividend a further 6.6%.
Small Troubles Don’t Hurt the Overall Trajectory Much
Not all the news out of Johnson & Johnson is good right now. The insider selling figures aren’t exactly bell-ringers as far as stock ownership goes. After all, the insiders are best placed to know if there’s a problem. If they’re abandoning ship, it’s likely a good plan to follow suit. However, the selling is fairly minimal at Johnson & Johnson, even if it does outstrip buying.
Of perhaps larger concern is the point that Johnson & Johnson will no longer offer sales guidance on its COVID-19 vaccine. This is due mainly to a global surplus of vaccines being available.
The impact on the company’s bottom line will likely not be particularly harsh here; the company was selling it at “not-for-profit” prices, so if it’s running that business at a visible break-even point, it’s not likely to drag on the profit margins.
Much like the news about insider selling, the news about no further sales guidance on the vaccine is troubling but likely not to be of much concern going forward. It’s a point to watch, but little more than that. Better yet, we’re also talking about a company with a huge portfolio of prescription and over-the-counter drugs. Everything from bandages to baby shampoo is made here, and that’s just for starters.
Concluding Views
While Johnson & Johnson shares may seem a bit high in price—you’ll need just over five shares to buy a decent television—there’s reason enough to buy. The company has an incredibly diversified product list. That makes it remarkably resistant to inflation and recessions; people still need bandages, and they still need baby shampoo.
It’s trading close to its lowest targets, which gives it at least some room for growth. Its dividend history survived the pandemic, which is a huge point in its favor. It even successfully settled a lawsuit with the state of West Virginia over opioids; sure, that means a $99 million payout, but that’s still comparatively light against its earnings.
Johnson & Johnson offers terrific return potential and a fine bulwark against a now increasingly likely recession to come. That’s a recipe for a bullish position and happy current investors as well.
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