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We take a look at the first quarter of 2019 fiscal year earnings report published by Johnson & Johnson the worlds largest general healthcare company
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About Johnson & Johnson (NYSE:JNJ)
At Johnson & Johnson, we believe good health is the foundation of vibrant lives, thriving communities and forward progress. That’s why for more than 130 years, we have aimed to keep people well at every age and every stage of life. Today, as the world’s largest and most broadly based healthcare company, we are committed to using our reach and size for good. We strive to improve access and affordability, create healthier communities, and put a healthy mind, body and environment within reach of everyone, everywhere. Every day, our more than 130,000 employees across the world are blending heart, science and ingenuity to profoundly change the trajectory of health for humanity.
Johnson & Johnson Credo
We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to provide value, reduce our costs and maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our business partners must have an opportunity to make a fair profit.
We are responsible to our employees who work with us throughout the world. We must provide an inclusive work environment where each person must be considered as an individual. We must respect their diversity and dignity and recognize their merit. They must have a sense of security, fulfillment and purpose in their jobs. Compensation must be fair and adequate and working conditions clean, orderly and safe. We must support the health and well-being of our employees and help them fulfill their family and other personal responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide highly capable leaders and their actions must be just and ethical.
We are responsible to the communities in which we live and work and to the world community as well. We must help people be healthier by supporting better access and care in more places around the world. We must be good citizens — support good works and charities, better health and education, and bear our fair share of taxes. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.
Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed, investments made for the future and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.
Johnson & Johnson Credo
We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to provide value, reduce our costs and maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our business partners must have an opportunity to make a fair profit.
We are responsible to our employees who work with us throughout the world. We must provide an inclusive work environment where each person must be considered as an individual. We must respect their diversity and dignity and recognize their merit. They must have a sense of security, fulfillment and purpose in their jobs. Compensation must be fair and adequate and working conditions clean, orderly and safe. We must support the health and well-being of our employees and help them fulfill their family and other personal responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide highly capable leaders and their actions must be just and ethical.
We are responsible to the communities in which we live and work and to the world community as well. We must help people be healthier by supporting better access and care in more places around the world. We must be good citizens — support good works and charities, better health and education, and bear our fair share of taxes. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.
Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed, investments made for the future and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.
So to the numbers we go
The following financial results were reported by Johnson & Johnson in their first quarter 2019 earnings report:
- Sales: $20.021 billion (up 0.1% from $20.009 in the previous period)
- Net earnings: $3.749 (down 14.2% from $4.367 billion in the previous period)
- Earnings per share: $1.39 (down 13.1% from $1.60 in previous period)
- Cash and equivalents: $14.734 billion
- Cash and equivalents per share: $5.45 (or 3.8% of JNJ's share price)
- Shareholder equity: $58.995 billion
- Shareholder equity per share: $21.85 per share. So should the group be dissolved all assets sold and liabilities paid each shareholder will receive $21.85 a share. But it is not uncommon for operating entities to trade well above their stated shareholder equity.
- Long term debt: Stable at $27.6 billion
- A worry for us is a firm with a large portion of their asset value being contained in "goodwill". Currently the group has $31.450 billion in goodwill, up 3.27% from $30.453 in previous period
- Dividend: $0.95
- Dividend yield: 2.68%
So any comments from Johnson & Johnson's management on the results?
The following commentary on the financial results by Johnson & Jonhson management was obtained from their results release.
“Our strong first-quarter results reflect continued underlying operational sales and adjusted EPS growth,” said Alex Gorsky, Chairman and Chief Executive Officer. “At the same time, we remain focused on investing in innovative technologies and platforms that will make a meaningful difference in the lives of patients around the world. I am proud of our global colleagues’ collective efforts to deliver on our long-term goals and our ability to create value for all of our stakeholders.”
Consumer
Consumer worldwide operational sales, excluding the net impact of acquisitions and divestitures grew 0.7%* driven by over-the-counter products including TYLENOL analgesics, digestive health products and international anti-smoking aids; and NEUTROGENA beauty products, primarily offset by lower sales of baby care products.
Pharmaceutical
Pharmaceutical worldwide operational sales, excluding the net impact of acquisitions and divestitures grew 7.9%* driven by STELARA (ustekinumab), a biologic for the treatment of a number of immune-mediated inflammatory diseases, IMBRUVICA (ibrutinib), an oral, once-daily therapy approved for use in treating certain B-cell malignancies, a type of blood or lymph node cancer, DARZALEX (daratumumab), for the treatment of multiple myeloma, TREMFYA (guselkumab), a biologic for the treatment of adults living with moderate to severe plaque psoriasis, INVEGA SUSTENNA/XEPLION/INVEGA TRINZA/TREVICTA (paliperidone palmitate), long-acting, injectable atypical antipsychotics for the treatment of schizophrenia in adults, PREZISTA/PREZCOBIX/REZOLSTA/SYMTUZA (D/C/F/TAF) for the treatment of human immunodeficiency virus type 1 (HIV-1) infection, UPTRAVI (selexipag), an oral prostacyclin receptor agonist used to treat pulmonary arterial hypertension and reduce hospitalization, and ERLEADA (apalutamide), a next-generation androgen receptor inhibitor for the treatment of patients with non-metastatic castration-resistant prostate cancer partially offset by declines in REMICADE (infliximab), a biologic approved for the treatment of a number of immune-mediated inflammatory diseases, and U.S. ZYTIGA (abiraterone acetate), an oral, once-daily medication for use in combination with prednisone for the treatment of metastatic, castration-resistant prostate cancer due to biosimilar and generic entrants.
Medical Devices
Worldwide Medical Devices operational sales, excluding the net impact of acquisitions and divestitures grew 4.3%* driven by the growth of electrophysiology products in the Interventional Solutions business; ACUVUE contact lenses in the Vision business; biosurgicals in the Advanced Surgery business; and wound closure products in the General Surgery business.
“Our strong first-quarter results reflect continued underlying operational sales and adjusted EPS growth,” said Alex Gorsky, Chairman and Chief Executive Officer. “At the same time, we remain focused on investing in innovative technologies and platforms that will make a meaningful difference in the lives of patients around the world. I am proud of our global colleagues’ collective efforts to deliver on our long-term goals and our ability to create value for all of our stakeholders.”
Consumer
Consumer worldwide operational sales, excluding the net impact of acquisitions and divestitures grew 0.7%* driven by over-the-counter products including TYLENOL analgesics, digestive health products and international anti-smoking aids; and NEUTROGENA beauty products, primarily offset by lower sales of baby care products.
Pharmaceutical
Pharmaceutical worldwide operational sales, excluding the net impact of acquisitions and divestitures grew 7.9%* driven by STELARA (ustekinumab), a biologic for the treatment of a number of immune-mediated inflammatory diseases, IMBRUVICA (ibrutinib), an oral, once-daily therapy approved for use in treating certain B-cell malignancies, a type of blood or lymph node cancer, DARZALEX (daratumumab), for the treatment of multiple myeloma, TREMFYA (guselkumab), a biologic for the treatment of adults living with moderate to severe plaque psoriasis, INVEGA SUSTENNA/XEPLION/INVEGA TRINZA/TREVICTA (paliperidone palmitate), long-acting, injectable atypical antipsychotics for the treatment of schizophrenia in adults, PREZISTA/PREZCOBIX/REZOLSTA/SYMTUZA (D/C/F/TAF) for the treatment of human immunodeficiency virus type 1 (HIV-1) infection, UPTRAVI (selexipag), an oral prostacyclin receptor agonist used to treat pulmonary arterial hypertension and reduce hospitalization, and ERLEADA (apalutamide), a next-generation androgen receptor inhibitor for the treatment of patients with non-metastatic castration-resistant prostate cancer partially offset by declines in REMICADE (infliximab), a biologic approved for the treatment of a number of immune-mediated inflammatory diseases, and U.S. ZYTIGA (abiraterone acetate), an oral, once-daily medication for use in combination with prednisone for the treatment of metastatic, castration-resistant prostate cancer due to biosimilar and generic entrants.
Medical Devices
Worldwide Medical Devices operational sales, excluding the net impact of acquisitions and divestitures grew 4.3%* driven by the growth of electrophysiology products in the Interventional Solutions business; ACUVUE contact lenses in the Vision business; biosurgicals in the Advanced Surgery business; and wound closure products in the General Surgery business.
Management outlook for Johnson & Johnson
The group expects adjusted diluted earnings per share for the full fiscal year of 2019 to come in at $8.53 to $8.63 which is very similar to their range provided in their previous guidance which expected adjusted diluted earnings per share to come in for the full fiscal year at $8.50 to $8.65
Johnson & Johnson (NYSE: JNJ) share price history
The image below shows JNJ's share price history over the last 5 years. And while there has been significant up and downs in the share price over the last 5 years the general trend in the group's share price has been upwards. With it being well below $100 in 2015 and it trading at over $140 currently
JNJ share price history
So should you buy Johnson & Jonhson shares?
It will be hard for most people across the world to go a day or a week without using one of Johnson & Johnson's products. They have a massive geographic footprint, strong brand name and a long history. They are a must in any solid long term stock portfolio. The trick is just to buy the shares when they offer great long term value in order for investors to maximize the returns from their investment in the group. And any investment in JNJ should be done with the intention of holding it long term. Its one of those shares you buy and lock in the bottom drawer. Its not the type of stock you make a quick buck of
Johnson & Johnson (NYSE: JNJ) stock valuation
So what are their shares worth based on their last set of financial results and the guidance on their expected earnings that they provided, which is similar to the previous earnings's report's guidance?
Based on the financial results and the guidance provided we value Johnson & Johnson shares at $138.20 a share. This will place the group on a forward PE ratio of 16.2 and a dividend yield of 2.7%. The PE not being that demanding at $138.20 a share at all. At the group's current price we feel that they are a tad overvalued to fully valued and would not recommending buying it at levels above our target price of $138.20 a share. Look to add to current holdings or buy for the first time if the price dip belows the $138 mark.