You would never think that something so seemingly innocuous as baby powder would sink an entire corporation. That’s what seems to be happening with Johnson & Johnson (NYSE:JNJ) as its latest attempt to tackle talc lawsuits just got scrubbed by a judge. The ruling was enough to send shares down nearly 4% in Monday afternoon’s trading.
Give Johnson & Johnson credit; it has been trying just about everything to settle the talc lawsuits. It’s just that so little of it actually seems to work. The latest attempt featured Johnson & Johnson taking the liabilities for its talc lawsuits—said to be tens of thousands of such cases—and folded them into a company called LTL Management, which promptly folded under the sheer weight of those lawsuits and filed for bankruptcy protection. This was the second such bankruptcy, and according to Judge Michael Kaplan in New Jersey, it was invalid. The reason? LTL Management was in neither “imminent” nor “immediate financial distress.”
With that option now lost, that also hurt Johnson & Johnson’s chances of setting up a settlement fund valued at $8.9 billion that would stop further claims from being filed. Johnson & Johnson hoped for a clean settlement to prevent what it called a process that would “…take decades and waste billions of dollars—mainly spent on legal fees.” For its part, LTL Management plans another appeal. Johnson & Johnson, meanwhile, would continue work with lawyers to settle, but if a trial would occur, Johnson & Johnson would promptly pivot to “…vigorously litigat(ing) these meritless claims…”
Analysts, however, are fairly convinced that Johnson & Johnson can eventually come out the other side on this. Thanks to four Buy ratings and seven Hold, Johnson & Johnson stock is considered a Moderate Buy. Further, with an average price target of $183.20, Johnson & Johnson stock comes with a 9.16% upside potential.