Johnson & Johnson targets sustainable M&A growth as sector diversifies, analyst says

Wednesday, Johnson & Johnson (NYSE:JNJ) reported second-quarter adjusted earnings per share of $2.82, representing year-over-year growth of 10.2% and beating the consensus estimate of $2.70.

RBC Capital Markets predicts a favorable environment in Q2 for non-Chinese companies. They expect Q3 to follow typical seasonal patterns without backlog issues, and solid MedTech markets are forecast for 2024 and beyond.

Johnson & Johnson maintains its consistent M&A strategy, demonstrating continuity even after the acquisition of Shockwave Medical. The company assures its ability to explore diverse opportunities in the future.

Johnson & Johnson said that while it is open to working with companies from all sectors and sizes, it prefers areas where expertise and capabilities are available.

It emphasized the company’s long-term approach to mergers and acquisitions, prioritizing sustainable growth over short-term profits.

The RBC analyst adds that both companies saw a two-year sequential increase in growth in the second quarter, indicating an improvement in fundamentals compared to the first quarter.

Johnson & Johnson is predicting faster sales growth in the medical technology sector in the second half of 2024. However, it is predicting a slowdown in sales growth in the innovative medicine segment, mainly due to the entry of the biosimilar Stelara into the European market.

RBC Capital maintains an Outperform rating and a $175 price target.

Truist Securities says the board noted that Imbruvica continues to face competitive pressure, including Jaypirc, which was developed by Eli Lilly and Co. (NYSE:LLY).

“We believe this may reflect physician demand for new options that can help combat resistance to older and less effective molecules such as Imbruvica,” the Truist analyst writes.

Johnson & Johnson sees strong demand for Tecvayli, despite slower growth following FDA approval of longer dosing interval Pfizer Inc. (NYSE:PFE) Elrexfio allows for biweekly dosing after week 24, as opposed to the weekly dosing schedule of Tecvayli.

This suggests a potentially positive signal for Elrexfio. Meanwhile, the focus is on Regeneron Pharmaceutical Inc. (NASDAQ:REGN) linvoseltamab, which is expected to provide a best-in-class profile with promising response rates (71% ORR and 46% CR or better).

Reduction: JNJ shares were down 0.42% to $155.92 as of last check on Thursday.

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