JNJ

Johnson & Johnson’s Shares Look Fairly Valued

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By Brian Nelson, CFA Johnson & Johnson (JNJ) reported third-quarter results on October 15 that beat the consensus forecast for both revenue and non-GAAP earnings per share. The company posted adjusted operational sales growth of 5.4% thanks to 6.4% expansion in Innovative Medicine and 3.7% growth in MedTech, while adjusted earnings per share came in at $2.42 in the quarter, down 9% as acquired IPR&D impacted results. Year-to-date free cash flow came in approximately $14 billion, up from $12 billion in the year ago period. J&J noted that it continues to advance its pipeline, including approvals for TREMFYA in ulcerative colitis and RYBREVANT + LAZCLUZE in non-small cell lung cancer. Management commentary was upbeat in the quarter:  Johnson & Johnson’s … Read more

An Important Measure of Leverage for Dividend-Growth and Income-Oriented Shareholders, One That Is Dividend-Adjusted

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As more and more investors rely on company dividends for income, dividends, in our view, have become more debt-like commitments in nature, especially from the perspective of dividend-growth or income-oriented shareholders. Years ago, we rolled out a measure of financial leverage that considers both the company’s debt and the present value of its future expected cash dividend obligations, which, in the eyes of die-hard dividend-growth or income-oriented shareholders, may be implicitly assumed to be debt-like commitments in substance. We think this leverage ratio can be used in conjunction with the Dividend Cushion ratio to gain additional insight into the dividend-paying financial health of an entity. Note: There is often great confusion with respect to published measures of financial leverage, and … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

Johnson & Johnson Finetunes 2024 Bottom Line Guidance

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Image: J&J’s shares have faced pressure since the beginning of 2023. By Brian Nelson, CFA Johnson & Johnson (JNJ) reported better-than-expected second quarter results on July 17. The company put up adjusted operational growth excluding the COVID-19 vaccine of 7.1%, while adjusted earnings per share was $2.82, up 10.2% on a year-over-year basis. The company’s Innovative Medicine division experienced an 8.8% worldwide operational revenue increase, excluding the COVID-19 vaccine, thanks to strength in DARZALEX, ERLEADA, TREMFYA, STELARA, SPRAVATO, and its Other Oncology segment. Its MedTech worldwide operational revenue advanced 4.4% thanks to strength in electrophysiology products and Abiomed in its Cardiovascular segment. Management had the following to say about the quarter: Johnson & Johnson’s second quarter performance reflects our relentless … Read more

Johnson & Johnson Narrows 2024 Outlook, Raises Dividend

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Image Source: J&J By Brian Nelson, CFA Johnson & Johnson (JNJ) reported mixed first-quarter 2024 results on April 16 with adjusted operational growth of 4%. Excluding its COVID-19 vaccine sales, revenue growth was 7.7% in the period. First quarter adjusted earnings per share advanced 12.4%, to $2.71, which was slightly better than the consensus forecast. Management was upbeat in the press release: Johnson & Johnson’s solid first quarter performance reflects our sharpened focus and the progress in our portfolio and pipeline. Our impact across the full spectrum of healthcare is unique in our industry, and the milestones achieved this quarter reinforce our position as an innovation powerhouse. J&J’s adjusted operational sales for its Innovative Medicine division increased 2.5%, while adjusted operational sales … Read more

Pfizer 6% Dividend Yield Speaks of Considerable Risk, Free Cash Flow Coming Up Short

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Image: Pfizer’s shares have been under considerable pressure the past few years. By Brian Nelson, CFA  Pfizer’s (PFE) revenue has faced pressure of late from expected declines in COVID-related sales from Comirnaty and Paxlovid, as the pharma giant navigates a post-COVID-19 world. However, excluding weakness from COVID-19 related revenue, the company’s underlying revenue grew 7% during 2023. Pfizer is working to build a strong oncology portfolio as it strives to realize billions in annualized cost savings to get to the other side of its troubles.   Image: Pfizer’s 2024 financial guidance. For the full-year 2024, Pfizer is targeting revenue in the range of $58.5-$61.5 billion (was $58.5 billion in 2023) and adjusted diluted earnings per share in the range of … Read more

You Already Own Whatever Your Investment Will Pay You in Dividends

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“Business owners across the world know that their business is not more or less valuable because they paid themselves a higher distribution this quarter.” – Brian Nelson, CFA Image Source: Images Money Stocks are generally valued on the present value of all their future free cash flows, which already include future dividend payments. A company’s dividend policy may impact an investor’s eagerness to pay a higher price for shares on the basis of a higher yield, but the dividend is a symptom of future free cash flows (and therefore intrinsic value), not a driver behind it. where A (t) is an Enterprise Free Cash Flow (1) at year t,                 B (0) is a Total Debt at time 0,                 … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

Eli Lilly’s Shares Have More Than Doubled During the Past 52 Weeks

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Image: Eli Lilly’s shares have been on a tear these past few years. By Brian Nelson, CFA On February 6, Eli Lilly (LLY) reported excellent fourth-quarter results that showed revenue and non-GAAP earnings per share coming in better than expectations. The company’s fourth-quarter results were bolstered by sales of diabetes and weight-loss drug Mounjaro, which saw sales in the quarter leap to ~$2.2 billion from ~$279 million in the year ago period. We continue to be in awe of the sales momentum behind GLP-1 receptor agonists, and the opportunity continues to be robust, despite already rapid sales acceleration. Though Eli Lilly trades at a premium to the high end of our fair value estimate range, we may be low in … Read more

Earnings Roundup: LMT, PG, MMM, GE, JNJ, VZ

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By Brian Nelson, CFA Lockheed Martin’s (LMT) Backlog Reaches Record Highs Dividend Growth Newsletter portfolio holding Lockheed Martin reported solid fourth-quarter 2023 results January 23 that showed a beat on both the top and bottom lines, but revenue growth remained challenged in the quarter, declining on a year-over-year basis. The defense contractor continues to be shareholder-friendly, returning a nice chunk of the $6.2 billion in free cash flow it generated during 2023. Lockheed Martin ended the year with a record backlog of $160.6 billion and remains well-positioned to support the U.S. and its allies with myriad defense technologies. The company is targeting 2024 revenue in the range of $68.5-$70 billion, a modest increase from the $67.6 billion it posted in … Read more