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Johnson & Johnson's Robust Pipeline Supports Its Above-Average Valuation

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Johnson & Johnson's Robust Pipeline Supports Its Above-Average Valuation
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While noting that the shares of Johnson & Johnson (NYSE: JNJ) trade at a premium to Argus' universe of pharmaceutical stocks, the firm said the valuation is justified, given its robust new drug pipeline, improving device business and expanding opportunities in its consumer businesses.

3Q Review

Analyst David Toung noted that the company delivered strong third-quarter results, beating on the bottom line and upwardly revising its 2017 earnings per share guidance by $0.03 at the mid-point of the range. Dissecting the results, the analyst noted that pharma and medical device businesses showed solid growth in the third quarter.

Remicade Risk

Argus believes a biosimilar version of Remicade will have only a modest impact on Remicade sales. Pfizer Inc. (NYSE: PFE) is set to launch Inflectra, the biosimilar in late November. Even if it has any, the firm believes Johnson & Johnson's robust pipeline that has the potential to deliver innovative new drugs could offset any possible slowdown in Remicade sales.

Related Link: Johnson & Johnson Delivers Another Earnings Beat

Raising Estimates, Reaffirming Rating, Price Target

Citing strong third-quarter results and the updated guidance, Argus raised its adjusted earnings per share for 2016 to $6.77 from $6.74 and that for 2017 to $7.08 from $7.05.

Argus reaffirmed its Buy rating and $145 price target on the shares of Johnson & Johnson.

At last check, the shares of Johnson & Johnson were down 0.42 percent at $114.92.

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Latest Ratings for JNJ

DateFirmActionFromTo
Nov 2016BarclaysDowngradesOverweightEqual-Weight
Sep 2016JefferiesMaintainsHold
Aug 2016JefferiesMaintainsHold

View More Analyst Ratings for JNJ
View the Latest Analyst Ratings

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