Replacing a blockbuster is the hardest job in the drug business. Johnson & Johnson (NYSE:JNJ) is in the middle of it, and the scoreboard looks oddly calm. In the second quarter of 2026, Stelara, its psoriasis and Crohn’s disease drug now facing cheaper biosimilar copies, dragged the pharmaceutical unit’s growth down by about 760 basis points. That unit still grew sales 6.8% on an operational basis (stripping out currency swings).
J&J makes its money in two places. Innovative Medicine sells prescription drugs for cancer, immune disorders, and brain diseases. MedTech sells surgical staplers, heart devices, orthopaedic implants, and the contact lenses sitting in plenty of bathroom cabinets.
For investors seeking defensive positioning among the 10 Best Bear Market Stocks to Invest In Right Now, that resilience has not gone unnoticed. The stock now trades at 23.60 times forward earnings, well above its own history. Whether that premium holds up depends less on any single quarter than on how deep the bench behind Stelara really runs.
Breadth Beats One Big Bet
J&J’s edge isn’t one drug. It’s the sheer number of growing franchises. Second-quarter sales reached $25,310 million, up 6.6%, with Innovative Medicine contributing $16,384 million and MedTech $8,926 million.
Growth came from all directions. Multiple myeloma treatments Darzalex, Carvykti, and Tecvayli kept climbing, as did the lung cancer pairing of Rybrevant and Lazcluze, the immunology drug Tremfya, and the neuroscience products Spravato and Caplyta. That breadth lets the company absorb a fading franchise, a test other big pharma names facing patent expirations are now taking too.
Earnings held up as well. Adjusted EPS (which excludes items such as acquisition-related costs) rose 4.7% to $2.90, while GAAP EPS slipped 0.9% to $2.27. This piece leans on the adjusted figure, since that’s the basis for both company guidance and the forward multiple.
The Bench Keeps Getting Deeper
The more telling signal was guidance. Management lifted its 2026 adjusted EPS outlook to a range of $11.60 to $11.75, with the midpoint implying 8.2% growth, up from a prior midpoint of $11.55. CEO Joaquin Duato said the company is on track for its first year above $100 billion in sales in its 140-year history.
The pipeline is feeding that confidence. The FDA expanded Tremfya’s label to include helping slow joint damage in psoriatic arthritis and approved Caplyta for reducing relapse risk in schizophrenia. Imaavy also earned Priority Review in a rare autoimmune blood disorder. On the MedTech side, Shockwave and electrophysiology products drove growth, and J&J plans to separate its Orthopaedics business.
Shareholders are sharing in the momentum. The company raised its dividend by 3.1% this year, its 64th straight annual increase, keeping it firmly among the market’s Dividend Kings.
Isn’t Another Cliff Coming?
That’s the fair worry. Stelara wasn’t alone in the second quarter: Remicade, Imbruvica, and Zytiga were also headwinds. Every patent eventually expires, and the bigger today’s winners get, the bigger the hole when their turn comes. The Orthopaedics separation will also reshape the company, adding execution risk to a story that already depends on flawless replacement.
Still, the evidence so far favors the replacement engine. A company that grows its drug unit through a hit this large has shown the playbook works. The open question is whether it keeps working at the pace the stock now assumes.
Paying Up for Durability
At 23.60 times forward earnings, as of October 9, you’re paying about $23.60 for every dollar J&J is expected to earn, compared with a 5-year average multiple of 16.77. That’s also richer than the sector, which trades at 18.94 times. For a company long valued as a steady, slow grower, that’s a meaningful re-rating, leaving the stock looking pricier on a plain earnings basis compared to other top picks among the 14 Best Blue Chip Dividend Stocks to Buy According to Hedge Funds.
The case for the premium rests on growth. Expected EPS growth of 11.77% in 2027 would be faster than the 8.2% adjusted growth implied by this year’s guidance midpoint. If that acceleration shows up, part of today’s multiple is simply the market pricing in a faster J&J than the one it valued over the past five years. The catch is that the premium leaves less cushion. At 16.77 times earnings, a stumble could be forgiven. At 23.60, it needs the growth story to keep delivering. Hedge funds seem comfortable with that setup, with 117 funds holding the stock in the most recent quarter, up from 113 in the prior one. Short interest sits at 0.98% of the float, a sign of relatively limited bearish positioning.
Quality, With a Higher Bar
J&J has done what few drugmakers manage: it has absorbed a major patent loss while raising guidance. The evidence suggests the stock deserves some premium to its own history. At 23.60 times earnings, though, much of that good news is already in the price.
The setup suits patient, income-minded investors who value durability and can accept a richer entry point. Third-quarter results, due early next week, will matter. If Innovative Medicine growth slows meaningfully, or the 2027 earnings path looks less certain, today’s premium would become much harder to defend.
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