Johnson & Johnson (JNJ) 2013 Review

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 dividend at an 11-13% 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] Crucell, which will strengthen its presence in the vaccine 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 best selling 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.

           JNJ stock offers a 3.5% dividend yield, carries a 15% debt to equity ration and is rated A++ by Value Line.

      Statistical Summary

                 Stock      Dividend         Payout      # Increases  

                 Yield      Growth Rate     Ratio       Since 2003

JNJ           3.5%           7%                46%              10

Ind Ave     1.8              9*                 30                NA 

                Debt/                       EPS Down       Net        Value Line

               Equity         ROE      Since 2003      Margin       Rating

JNJ           15%            23%            0                21%           A++

Ind Ave     19               14             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 (straight red line) and eventually the November 2008 trading high (green line).  Long term, the stock is in an uptrend (blue lines).  Intermediate term, it is in an uptrend (purple lines).  Short term, it is in an uptrend (brown line).  The red wiggly line is the 50 day moving average.  The Dividend Growth Portfolio owns a full position in JNJ.  The upper boundary of its Buy Value Range is $58; the lower boundary of its Sell Half Range is $78.

  

http://finance.yahoo.com/q?s=JNJ

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