Workhorse Johnson & Johnson (JNJ Stock) plows new all-time highs

Johnson & Johnson moves up on mixed results

Johnson & Johnson (NYSE:JNJ) is, if nothing else, a workhorse among stocks and one any investor could own. The company’s business is more than entrenched, it often trades at a discount to the S&P 500, it delivers steady consistent growth, and it pays a nice dividend. That’s why we’re not surprised to see it moving higher after what can only be called a mixed report. The takeaway from the report, however, is the core business, business ex-COVID, is just as healthy as it ever was. What this means for investors is steady if slow growth, a healthy balance sheet, and an outlook for dividend growth that is unrivaled among companies with such a long, long history of annual distribution increases.

Johnson & Johnson alters guidance for 2022

Johnson & Johnson had a good quarter if one with mixed results compared to the analyst estimates. The caveat is that weakness on the top line is due primarily to sluggishness in the COVID-19 market that is driven by oversupply and waning demand. This left revenue at $23.4 billion and about 90 basis points below the consensus figures but still up 4.8% from last year.

Revenue growth was underpinned by strength in the Pharma segment which accounts for more than 50% of the revenue. Pharma sales grew by 6.3% to 12.87 billion on a 36% increase in sales of Darzalex. The Medtech segment grew by 5.9% but is the smallest segment while the Consumer Health segment declined by 1.5%. On a regional basis, sales were strongest Internationally at up 7.2%.

Moving down to the margin, the margin was mixed and contracted on a GAAP basis while expanding on an adjusted basis. Impacts to the GAAP margin include higher input costs, increased R&D, and increased SG&A expenses. The GAAP earnings contracted by 16.8% while the adjusted grew by 3% to outpace the Marketbeat.com consensus by $.10 and the guidance is just as mixed. The company lowered its overall guidance for adjusted EPS to a range below the previous range but maintained the core “operational” ex-COVID guidance as previously stated. To us, this means the COVID tailwinds are slowing and the business will have to rely on its own merits going forward.

Johnson & Johnson is a king among dividend payers

Johnson & Johnson is a Dividend King with 59 years of consecutive increases under its belt. In our view, that alone is enough to mark the payment as safe but there is more to this story. The sock is yielding over 2.35% while trading at under 17X its earnings which provides a premium and a discount relative to the broad market. Add in the low 42% payout ratio and 6% dividend CAGR and the odds the company will continue to pay and increase the dividend grows.

The technical outlook: Johnson & Johnson confirm uptrend

Johnson & Johnson has been in a sustained uptrend for many years and is scaling new highs now. The move is supported by the value, the yield, and the outlook along with a dose of positive analyst sentiment. The move to new highs also confirms the uptrend and the indicators are consistent with new highs. The catch is that there is some resistance at this level, if the market can’t sustain the rally it may be in for consolidation or even a pullback. Our targets for support are at $180 and $175.