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