Stifel maintains Johnson & Johnson shares at Hold rating

Stifel has reiterated its Hold rating on shares of Johnson & Johnson (NYSE: JNJ) with a steady price target of $160.00.

The firm's decision follows Johnson & Johnson's recent completion of the V-Wave Ltd. acquisition, initially announced on August 20, 2024. The transaction, valued at $600 million, could include additional milestone payments of up to $1.1 billion, contingent on regulatory and commercial successes.

Johnson & Johnson's press release highlighted that V-Wave is dedicated to creating new treatments for heart failure patients. The company's intra-arterial shunt device aims to alleviate the high left atrial pressure characteristic of congestive heart failure, potentially reducing cardiovascular incidents and the need for hospitalizations due to heart failure.

The financial implications of the acquisition for Johnson & Johnson include an in-process R&D charge of approximately $600 million in Q4 of 2024. This expense is expected to decrease the company's earnings per share (EPS) for 2024 by $0.24 and for 2025 by $0.06.

As a result, Stifel has adjusted its EPS estimates for Johnson & Johnson to $9.76 for 2024, down from the previous estimate of $10.00 per share. For 2025, the EPS estimate has been revised to $10.65, from the former projection of $10.71 per share.

In other recent news, Johnson & Johnson has been active in earnings, mergers, and analyst ratings. Wells Fargo has maintained a $163 target on Johnson & Johnson, despite projecting slower earnings per share (EPS) growth for 2025 due to factors like the Inflation Reduction Act and the U.S. loss of exclusivity for Stelara. The firm also anticipates that recent mergers, including the acquisition of V-Wave Ltd., will dilute EPS by $0.92 in 2024 and $0.22 in 2025.

Johnson & Johnson's recent developments include the completion of the V-Wave acquisition, expanding its cardiovascular portfolio, and the discontinuation of a mid-stage trial for dengue prevention. The company also reported positive results from a comparative study showing that its drug ERLEADA® significantly improved overall survival in patients with metastatic castration-sensitive prostate cancer over enzalutamide.

Furthermore, Johnson & Johnson has submitted a supplemental Biologics License Application to the FDA for a new indication of its DARZALEX FASPRO® treatment in combination with other drugs for newly diagnosed multiple myeloma patients not eligible for autologous stem cell transplant. Lastly, Johnson & Johnson's subsidiary, Red River Talc LLC, filed for a prepackaged Chapter 11 bankruptcy as part of a strategy to settle ongoing ovarian cancer claims related to cosmetic talc litigation in the U.S.

InvestingPro Insights

Johnson & Johnson's recent acquisition of V-Wave Ltd. aligns with its strong position in the healthcare sector, as reflected in the latest InvestingPro data. Despite the short-term impact on earnings, JNJ's financial metrics suggest a robust underlying business. The company's revenue for the last twelve months as of Q2 2024 stands at $86.58 billion, with a healthy gross profit margin of 69.43%.

InvestingPro Tips highlight JNJ's financial stability and shareholder-friendly policies. The company has raised its dividend for 53 consecutive years, demonstrating a commitment to returning value to shareholders. This is further supported by a current dividend yield of 3.09%. Additionally, JNJ is trading at a low P/E ratio relative to its near-term earnings growth, which could indicate potential value for investors despite the temporary EPS reduction due to the V-Wave acquisition.

The acquisition's focus on heart failure treatments aligns with JNJ's status as a prominent player in the Pharmaceuticals industry. While the acquisition will impact short-term earnings, JNJ's strong cash flows and moderate debt levels suggest it's well-positioned to absorb the costs and potentially benefit from V-Wave's innovative technologies in the long run.

For investors seeking more comprehensive analysis, InvestingPro offers 7 additional tips for Johnson & Johnson, providing deeper insights into the company's financial health and market position.

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