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Hype Asset of the Day | October 26th, 2022




Johnson & Johnson (NYSE: JNJ)

The company has been around for more than a century and is a leader in the healthcare industry, a sector that seems to be recession-proof because consumers need healthcare regardless of how the economy’s doing. It operates in three segments: consumer products, medical devices, and pharmaceuticals. J&J is in the process of spinning off the consumer products business, dubbed Kenvue, to separate the higher-growth segments in devices and pharma. With a positive Q3 report, the healthcare mogul has seen an increase in mentions by 117% over the last day, encouraging investors to wonder if this is the right time to take a position in the company. Currently, shares of Johnson & Johnson trade at $171.99.

Positive Hype

With a mammoth portfolio of consumer goods, pharmaceutical, and medical device products, and a track record of not only maintaining but increasing its dividend payout for six decades and counting, there are more than a few reasons to love J&J.


  • Johnson & Johnson's shares are up 4% over the past 12 months, which is a big improvement over the S&P 500 average's 17% drop.


  • Johnson & Johnson is a company with an AAA credit rating, and it's one of the few Dividend Kings on the market, having raised its dividend annually for 60 straight years.


  • The healthcare giant currently pays a dividend yield of 2.7%, and its payout has nearly doubled over the last decade, making it a good bet for investors looking for both dividend yield and growth.


  • The company is also diligent in rewarding investors. It has spent $2 billion this year on share buybacks, with another $3 billion scheduled.


  • The company recorded a stunning $94 billion in revenue in 2021 alone, representing growth of nearly 14% from the prior 12-month period. Its net earnings also surged by 42%.


  • Even in an environment of inflation and supply chain woes, the company listed revenue of $23.8 billion, up 1.9%, and earnings per share (EPS) of $1.68, up 22.6%.


  • JNJ reported an EPS of $2.55 on revenue of $23.79 billion to top the average analyst estimate of $2.52 on revenue of $23.46 billion. Sales rose +1.9%, modestly helped by the higher-than-expected COVID-19 vaccine sales.


  • This top and bottom line growth was fuelled by respective sales increases of 4%, 14%, and 18% in the company's consumer health, pharmaceutical, and medical device segments.


  • Over the past decade, the stock has generated a total return of 202%. That's not too bad, particularly when you consider the S&P 500 has delivered a return of 213%, only slightly above that, in the same period.

Negative Hype

Although Johnson & Johnson has seen major success, no investment is perfect, and this is no exception. Here are some reasons you might not want to invest in J&J immediately.


  • Consumer healthcare, the only underperforming segment, is being spun off into a separate company called Kenvue sometime next year. There is a chance that this could continue to underperform, causing lower returns and maybe losses for investors.


  • On the guidance front, JNJ maintained 2022 full-year guidance midpoints for adjusted operational sales and reported adjusted EPS. However, JNJ now sees full-year revenue between $93 billion to $93.5 billion, down from the prior outlook of $93.3 billion to $94.3 billion. Bloomberg consensus stood at $95.06 billion.


Conclusion

Considering the threat of a worsening recession, investors that are looking for a safe haven can find it in J&J. If you're an investor seeking a company with a history of growth that has the products and competitive advantage to sustain it well into the future, and a rock-solid dividend to boot, Johnson & Johnson could make an excellent addition to your portfolio.



HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.




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