Ignore the Vaccine Noise, Johnson & Johnson Is in Rude Health, Says Top Analyst

It has been an action-packed week so far for pharma giant Johnson & Johnson (JNJ).

On Tuesday, the company reported Q3 earnings with results handily beating the estimates. JNJ posted revenue of $21.08 billion, a 1.7% year-over-year increase and higher than the $20.21 billion consensus estimate. Non-GAAP EPS of $2.20 beat the Street’s forecast by $0.22.

Looking ahead, JNJ raised its 2020 guidance and now expects revenue to come in between $81.2 billion to $82.0 billion, up from the previous call for between $79.9 billion and 81.4 billion. Non-GAAP EPS was also raised from $7.85 at the mid-point to $8.00 at the mid-point.

The quarterly statement amounted to a solid display of JNJ’s health with a large portion of the company’s drugs posting better-than-expected sales in the period. 

However, shares trended downwards on Tuesday despite the decent showing, as the report was overshadowed by disappointing news.

On Monday evening, JNJ announced its was pausing the Phase 3 trial of its coronavirus vaccine candidate due to a participant’s unexplained illness. While a more detailed explanation has not yet been provided, Raymond James analyst Jayson Bedford tells investors not to make too much of the clinical study’s halt. It is not uncommon to pause a trial, and the analyst notes that “given the political nature of vaccines, we assume J&J is taking a cautious approach.”

In fact, the 5-star analyst believes the stock is currently at a “discounted valuation” and further said, “The vaccine commentary overshadowed what was an encouraging 3Q result that handily beat consensus. Med Devices produced the upside surprise, and procedures are ramping faster-than expected, which should be good for the entire Med Tech sector. We expect trends to improve in 4Q, and into 2021. We expect more clarity on the vaccine trial towards the end of the week, but we do not believe the vaccine is a critical factor for the stock (it is not in consensus models, or reflected in the multiple). While we acknowledge the social importance of this trial, the vaccine has never been a driver of JNJ's stock.”

Accordingly, Bedford rates JNJ an Outperform (i.e. Buy), whilst sticking to a $158 price target. (To watch Bedford’s track record, click here)

The rest of the Street appears nonplussed by the trial’s travails, too. All 8 analysts keeping an eye on JNJ’s progress have a Buy on the stock. The Strong Buy consensus rating is backed by a $169.38 price target, suggesting shares will move upwards by 15% over the next 12 months. (See JNJ stock analysis on TipRanks)

To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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

In This Story


Latest Markets Videos


    TipRanks is the most comprehensive data set of sell side analysts and hedge fund managers. TipRanks' multi-award winning platform ranks financial experts based on measured performance and the accuracy of their predictions so investors know who to trust when making investment decisions.

    Learn More