By 
Mark Ralston/AFP via Getty Images
This article is an excerpt from Barron’s 10 favorite stocks for 2022, published on Dec. 17. To see the full list, click here.
Johnson & Johnson is shaking off its stodgy image as it moves to develop a broad and underappreciated drug portfolio and spin off its consumer business.
The stock, now priced around $173, trades for a reasonable 17 times projected 2022 earnings of $10.38 a share and has a secure 2.5% dividend yield.
The world’s largest healthcare company recently spent a day highlighting opportunities among its existing drugs and its pipeline. These include Darzalex for multiple myeloma, Tremfya for psoriasis, and Rybrevant for lung cancer.
Johnson & Johnson (ticker: JNJ) aims to expand its pharmaceutical sales by 5% annually, to $60 billion, by 2025 and have 13 drugs with annual sales of $1 billion or more.
Some analysts came away impressed. Citi Research’s Joanne Wuensch lauded the “breadth and depth” of the drug portfolio. She has a Buy rating and $192 price target. J&J is also a big producer of medical devices.
The spinoff of the consumer products business, which includes Tylenol, Listerine, and Band-Aids, may not add a lot of value, however. And the company’s potential legal liability for talc and opioids remains a risk.
Some investors would like to see Johnson & Johnson ramp up a small buyback program, given its earnings power and conservative balance sheet. J&J boasts one of only two triple-A credit ratings among U.S. corporations. Microsoft (MSFT) has the other.
Recent Price
YTD Change
2021E EPS
2022E EPS
2022E P/E
Dividend Yield
Market Value (bil)
Amazon.com / AMZN
$3,377.42
4%
$41.11
$51.37
65.7
None
$1,713
AT&T / T
23.71
-18
3.38
3.17
7.5
8.8%
169
Berkshire Hathaway / BRK.A
454,550.00
31
17,466.30
18,928.50
24.0
None
673
General Motors / GM
58.39
40
6.73
6.93
8.4
None
85
Hertz Global Holdings / HTZ
21.01
-22*
4.02
2.55
8.2
None
10
IBM / IBM
125.93
5
10.05
11.04
11.4
5.2
113
Johnson & Johnson / JNJ
173.01
10
9.83
10.38
16.7
2.5
455
Nordstrom / JWN**
20.05
-36
1.27
1.99
10.1
None
3
Royal Dutch Shell / RDS.B
42.82
27
4.86
6.19
6.9
3.9
166
Visa / V***
214.37
-2
5.91A
7.04
30.5
0.7
467
*Since July 1. **Estimates for Jan. 2022 and Jan. 2023 fiscal year ends. ***Sept. fiscal year end. E=estimate. A=actual.
Source: FactSet
Write to Andrew Bary at andrew.bary@barrons.com
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