Johnson &
Johnson is a major developer, manufacturer and marketer of health care
products. Its major divisions are: Consumer (baby care, oral care, non-prescription
drugs, wound care and skin care), Medical Devices (electrophysiology,
circulatory disease management and orthopedic joint reconstruction) and
Pharmaceuticals (contraceptives, psychiatric, anti-infective, gastrointestinal
and dermatological). Over the past ten
years, the company has earned a 20-30% return on equity while growing its
earnings and dividends at an 10-11% annual rate. While profit and dividend
growth may slow somewhat short term, its strong, well diversified product line
should continue to grow rapidly longer term as a result of:
(1)
acquisitions--the latest being [a] Cougar Biotechnology, a biotech company
developing oncology products for treating prostate cancer, breast cancer and
multiple myeloma, [b]Aragon, which will strengthen its presence in the prostate
cancer market, [c] Synthes which will enhance its medical device portfolio and
[d] an agreement with Gilead to develop a once daily antiretroviral HIV pill,
(2) continued
strong performance of Remicade, JNJ ’s
bestselling drug for the treatment of rheumatoid arthritis, Crohn’s disease and
ulcerative colitis,
(3) focus on
commercializing its late stage pharmaceutical pipeline and invest in future
growth areas (venous thromboembolism, deep vein thrombosis, atrial
fibrillation,
(4) growing
presence in the emerging markets.
Negatives:
(1) generic
sales,
(2) FDA warnings
on several drugs including Remicade,
(3) EU pricing
pressures,
(4) FDA recently
imposed manufacturing restrictions,
(5) the risk of
product recalls.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2004
Ind Ave 1.7 10* 33 NA
Debt/ EPS Down Net Value Line
Equity
ROE Since 2004 Margin Rating
Ind Ave 20 13 NA 9 NA
*most companies in JNJ industry do not pay dividends
Chart
Note:
JNJ stock made good progress off its March 2009 low, quickly surpassing the
downtrend off its September 2008 high (red line) and the November 2008 trading
high (green line). Long term the stock
is in an uptrend (straight blue lines).
Intermediate term it is in an uptrend (purple lines). Short term it is in an uptrend (brown
line). The wiggly blue is on balance volume. The Dividend Growth Portfolio owns a 75%
position in JNJ by virtue of having Sold Half in 2002 and experienced additional
appreciation since then. The upper boundary
of its Buy Value Range is $61; the lower boundary of its Sell Half Range is $98.
2/14
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