Johnson & Johnson (NYSE: JNJ) recently reported its Q4 results, with revenues and earnings exceeding the street estimates. The company reported revenue of $22.5 billion and adjusted earnings of $2.04 per share, compared to the consensus estimates of $22.4 billion and $2.02, respectively. The company continued to benefit from increasing sales of Darzalex. The company’s outlook for 2025 was also above expectations. However, JNJ stock fell 2% post the results announcement.
JNJ stock, with -4% returns since the beginning of 2024, has underperformed the S&P 500 index, up 28%. One of the company’s top-selling drugs is now facing biosimilar competition, weighing on its stock price growth lately. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
Johnson & Johnson’s revenue of $22.5 billion in Q4 was up 5.3% y-o-y. The company reported a 4.4% rise in Innovative Medicine (pharmaceuticals business) and a 6.7% growth for its MedTech (medical devices business) segment. The pharmaceuticals sales growth was led by a continued uptick for Darzalex, up 21% y-o-y. The comparatively newer drugs – Erleada and Spravato continued to see double-digit gains. However, Stelara saw its revenue fall 15% y-o-y to $2.3 billion in Q4. Stelara is expected to see a meaningful decline in the coming years, given the biosimilar competition. MedTech sales growth was led by the cardiovascular business, up 24% y-o-y to $2.1 billion, led by the impact of the Shockwave Medical acquisition in May last year.
Johnson & Johnson’s gross margin improved by 180 bps y-o-y to 68.3% in Q4. It reported adjusted earnings of $2.04 per share, compared to $2.29 per share in the prior-year quarter. The bottom-line figure for Q4’24 includes a $0.22 per share charge toward acquired IPR&D charges related to the V-Wave acquisition.
Looking forward, Johnson & Johnson reported the 2025 sales outlook of $91.5 billion and adjusted earnings of $10.85 per share at the mid-point of the guided range. This fares better than the consensus estimates of $91.0 billion and $10.56 per share, respectively.
What does this mean for JNJ stock?
Although Johnson & Johnson posted an upbeat Q4, its stock hasn’t seen any upside post the results announcement. Even if we look at a slightly longer period, the performance of JNJ stock with respect to the broader markets over the last four-year period has been quite volatile. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, is less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could JNJ underperform the S&P over the next 12 months — or will it see a strong jump? While we will soon update our model for JNJ to reflect the latest results, from a valuation perspective, we think JNJ stock has some room for growth. At its current levels of $145, JNJ stock is trading at 13x forward expected earnings of $10.85 per share, at the mid-point of the company’s provided range. The 13x figure is lower than the stock’s average P/E ratio of 17x over the last five years.
While JNJ stock looks like it has some room for growth, it is helpful to see how Johnson & Johnson’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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