UPDATE: Goldman Sachs Upgrades Johnson & Johnson Based on Solid Pharma Business

In a report published Friday, Goldman Sachs analyst Jami Rubin upgraded Johnson & Johnson (NYSE: JNJ) from Sell to Neutral and raised the 12 month PT from $87 to $95.

Rubin noted Johnson and Johnson's solid pharma business performance this year, commenting on launches of Xarelto, Invokana, and Zytiga, as well as the impending launches of Ibrutinib and Simeprevir. The analyst stated, “No company depicts this transformation better than JNJ's pharma business, in our view. With 70% of current sales leveraged to specialty/biologics and with most of JNJ's pipeline assets following the same pattern, we expect product mix to continue moving closer to biotech.”

The analyst reminded investors that although JNJ has been a strong stock (up 26% versus S&P 500 +15%, S&P Healthcare +23% and S&P Pharma +15%), it has fallen behind the group since late summer. Rubin continues to see limits of value creation due to Johnson and Johnson's current diversified structure.

Goldman Sachs estimated 3Q EPS of $1.32 and 2013 EPS of $5.48, a slight upward revision based on new product launches. JNJ closed at $85.96 on Thursday and is currently trading up 2.12% this morning.