Goldman Sachs Comments on Breaking Up of Johnson & Johnson

Goldman Sachs has published a research report on Johnson & Johnson

commenting on the company's break up and new CEO Alex Gorsky. In the report, Goldman Sachs writes, "There are several strategies through which we think new CEO Alex Gorsky can generate higher returns for JNJ; however, we see a break-up (into Pharma, Consumer, and MD&D) offering the most potential for upside. As a standalone company, each business could be a leader (based on sales and market share) in its respective industry and, we believe, generate higher returns than JNJ does as a conglomerate. We acknowledge that JNJ's management team has given no indication of following this strategy, and interviews with Mr. Gorsky indicate his preference for getting bigger, not smaller. However, in our view, evidence is building across healthcare that smaller, more focused companies can perform better than their diversified peers, with ABT, COV, and PFE being the most recent examples of companies that have divested businesses and shown enhanced returns (both operational and stock price) vs. peers." Goldman Sachs maintains its Neutral rating and $65 price target on Johnson & Johnson, which closed yesterday at $62.21.