Goldman Sachs: Break-up Could Maximize Value for Johnson & Johnson (JNJ)

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Analysts at Goldman Sachs on Thursday published a report detailing the break-up potential for diversified medical giant Johnson & Johnson ( JNJ ).

The firm maintained its "Neutral" rating and $65 price target on JNJ, which suggests a 4.5% upside to the stock's Wednesday closing price of $62.21.

A Goldman analyst commented, "There are several strategies through which we think new CEO Alex Gorsky can generate higher returns for JNJ; however, we see a break-up (into Pharma, Consumer, and MD&D) offering the most potential for upside. As a standalone company, each business could be a leader (based on sales and market share) in its respective industry and, we believe, generate higher returns than JNJ does as a conglomerate. We acknowledge that JNJ's management team has given no indication of following this strategy, and interviews with Mr. Gorsky indicate his preference for getting bigger, not smaller. However, in our view, evidence is building across healthcare that smaller, more focused companies can perform better than their diversified peers, with ABT, COV, and PFE being the most recent examples of companies that have divested businesses and shown enhanced returns (both operational and stock price) vs. peers."

Johnson & Johnson shares were mostly flat in premarket trading Thursday.

The Bottom Line
We recently began recommending shares of Johnson & Johnson ( JNJ ) when the stock was trading at $64.75. The company has a 3.92% dividend yield, based on last night's closing stock price of $62.21.

Johnson & Johnson ( JNJ ) is a "Recommended" dividend stock, holding a Dividend.com DARS™ Rating of 3.5 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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