Johnson & Johnson Is a Good Bet

Johnson & Johnson (JNJ) announced second quarter ended June 30, 2016 net sales of $18.5 billion, up 3.9 percent year-over-year from $17.8 billion during the same period last year.

Johnson & Johnson declared second quarter of 2016 net earnings of $3.99 billion or $1.43 per diluted share, down 11.5 percent year-over-year from $4.52 billion or $1.61 per diluted share in second quarter of 2015.

The healthcare research and development company reported continued year-over-year top line growth primarily driven by robust underlying expansion across the enterprise, solid strength of the company’s pharmaceutical business driven by improved acceptance of new products and impressive achievement of notable clinical milestones.

Analyzing the performance  

Johnson & Johnson has illustrated solid year-over-year worldwide sales growth including, 0.4% of year-over-year international sales growth, 7.4% of year-over-year sales expansion in the US, geographic sales growths in the Western Hemisphere (ex.
US) and Africa, Asia-Pacific of 2.7% and 1.7% respectively. However, Europe witnessed 1.5% year-over-year sales decline mainly as a result of unfavorable foreign currency translations. Pharmaceutical segment illustrated 7.4% year-over-year sales growth. However, the consumer and medical devices segments witnessed 3.8% and 0.8% year-over-year sales decline respectively despite the company’s ongoing efforts for growth improvement through the latest introductions of new products and strategic transformation of its core commercial models.

The healthcare research company depicted mixed operational performance worldwide with attractive growths in baby care, oral care, OTC, skin care, Women’s Health, Wound care/other and total consumer growth sub-segments. The consolidated Pharmaceutical segment expanded 9.7% and impressively year-over-year driven by robust growths across immunology, infectious diseases, neuroscience, oncology and Cardiovascular/ Metabolism/ Other sub-segments. Further, the total medical devices segment grew 1.8% year-over-year driven by attractive growths across Orthopaedics, Surgery and Vision Care sub-segments what offset by significant sales decline across Diabetes Care and Cardiovascular sub-segments.

An extremely well-diversified and geographically well-distributed company growth is mainly due to significant customer traction for Johnson & Johnson’s innovative set of healthcare solutions which is expected to drive sustainable long-term company growth while delivering attractive shareholder returns.

The right strategies

Johnson & Johnson has broad-based growth benefits that allows it to deliver sustainable, consistent and robust financial performance. Some of the key growth advantages include, superior access to expansion prospects throughout the global healthcare markets, strategic partnerships of choice, targeted partnerships with public health and local government organizations, wide choices of developing partnerships, innovative products and healthcare solutions, cross-category and convergent product platforms and superior enterprise capabilities and efficiencies.

The healthcare products and services company is uniquely adopting a performance-driven strategy focused on growing sales quicker than market, expanding earnings quicker than sales, creating and delivering attractive value through well-planned partnerships and acquisitions, delivering robust dividend yield to offer continuing and attractive general shareholder returns. Moving ahead, Johnson & Johnson is strategically expanding investments through R&D activities while delivering industry-leading margins. The company is tactically growing its year-over-year research and development expenditure while consistently increasing the margins through superior cost control and well-planned long-term growth program.

The impressive growth partnerships of Johnson & Johnson with key private and public enterprises coupled with a well-distributed capital spending program focused on offering impressive long-term company growth while delivering attractive investor returns is believed to continue to attract several other long-term investors to become a part of this superior growth story.


Overall, the investors are advised to “Buy” equity in Johnson & Johnson considering the company’s significant near-term and longer term growth prospects with PEG ratio of 2.80, depicting healthy company growth. The profit margin of 21.20% also seems impressive. Moreover, the company has a solid financial position with significant total cash of $42.87 billion against smaller total debt of $26.56 billion only, encouraging Johnson & Johnson to continue to make future growth investments while delivering attractive shareholder returns.
Published on Aug 19, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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