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This article first appeared on Simply Wall St News.
In the last 2 years, Johnson & Johnson (NYSE: JNJ) didn't do as well as the broad market, gaining a modest 30%. Yet, in 2022, the company's health has indeed been wealth for its investors.
So far, it has comfortably outperformed through a market correction, and after a dividend hike, investors will be looking for more of the same.
View our latest analysis for Johnson & Johnson
First-quarter 2022 results
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EPS: US$1.93 (down from US$2.36 in 1Q 2021).
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Revenue: US$23.4b (up 5.0% from 1Q 2021).
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Net income: US$5.15b (down 17% from 1Q 2021).
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Profit margin: 22% (down from 28% in 1Q 2021). Higher expenses drove the decrease in the margin.
The pharmaceutical division market had the largest growth (+6.3% Y/Y), while the Consumer Health segment reported a decline of 1.5% Y/Y. Revenue was in line with analyst estimates. Earnings per share (EPS) missed analyst estimates by 16%.
Over the next year, revenue is forecast to grow 2.5%, compared to a 14% growth forecast for the industry in the US. Over the last 3 years, on average, earnings per share have increased by 10% per year, whereas the company’s share price has risen by 9% per year.
Is Johnson & Johnson still cheap?
According to our valuation model, the intrinsic value for the stock is $266.22,which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low.
What’s more interesting is that Johnson & Johnson’s share price is relatively stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be fewer chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the broader market, given its low beta.
Can we expect growth from Johnson & Johnson?
Future outlook is an important aspect when you’re buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a low price.
With profit expected to grow by 33% over the next couple of years, the future seems bright for Johnson & Johnson. Higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
Latest Developments & Implications
Following the earnings report, the company adjusted the EPS guidance downwards, from US$10.4-10.60 to US$10.15-10.35. The company maintained 2022 full-year guidance for adjusted operational EPS and expected operational sales to be in the range of US$97.3b-98.3b.