Pharmaceutical giant Johnson & Johnson (NYSE:JNJ) is one of Jim Cramer’s favorite stocks in the sector. Over the course of this year, the CNBC TV host has praised the firm on multiple occasions. Among the reasons that he has been optimistic about Johnson & Johnson (NYSE:JNJ) include the firm’s cancer drug portfolio and its Triple A balance sheet. For instance, in his July 6th appearance on Mad Money, Cramer remarked that “P&Gs and the J&Js in your portfolio allow you to safely own the techs.” With tech stocks struggling recent due to concerns about the data center buildout, it was unsurprising that Johnson & Johnson (NYSE:JNJ) popped up on his radar once again on August 24th:
“I’ve been using that one stock JNJ to be able to [example] becuase it has a better balance sheet at this point than the US government, it doesn’t need money, it’s got very good science. It’s not hostage to the government right now. It’s got more new drugs than any of the, 18 new compounds, could be a billion dollars. And I come back and say, all right, well that’s the treasury, plus the upside.”
Johnson & Johnson (NYSE:JNJ)’s shares are up by more than 50% over the past year. Cramer’s optimism about the firm covers several, but not all, aspects of the debate surrounding the firm. While Johnson & Johnson (NYSE:JNJ) has raised its full-year revenue guidance to a midpoint of $101 billion, removed headwinds related to its longstanding talcum powder lawsuits and posted strong growth with its Darzalex and Tremfya drugs for myeloma and psoriasis, concerns about its MedTech growth, flat profits growth and a 55.7% sales hit to its immune system disorders drug Stelara continue to raise the potential for headwinds.
For instance, Johnson & Johnson (NYSE:JNJ)’s MedTech business grew by a mere 3.6% in the second quarter as it was impacted by a slowdown in sales of heart-recovery devices following a study in the United Kingdom. Additionally, for a firm that’s struggling on the net income growth front, $5.5 billion in talc powder settlements will continue to be a headwind to the cash flow. Johnson & Johnson (NYSE:JNJ) is due to pay $3 billion out of the $5.5 billion in 2027. Yet, at the same time, the diversified business nature means that some segments are growing. One example is the Innovative Medicine Business, which grew by 6.8% to $16.4 billion revenue, due to Darzalex and Tremfya.
Looking at hedge fund sentiment, while 113 out of the 1,022 funds part of Insider Monkey’s Q1 database had held a stake in Johnson & Johnson (NYSE:JNJ), the figure jumped to 117 out of 1,006 funds in Q2. Among the notable additions was Polar Capital‘s $199 million stake, while Fisher Asset Management bumped its stake by 44% to $3.3 billion. On the valuation front, Johnson & Johnson (NYSE:JNJ) trades at a forward P/E ratio of 23.4,2 which is lower than MRK’s 56.82 and higher than AbbVie’s 18.83. Shares short as a percentage of float are negligible at roughly 1%.
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Disclosure: None.
