Source: PaxForex Premium Analytics Portal, Fundamental Insight
Healthcare company Johnson & Johnson remains a favorite of dividend-oriented investors. Its consistently outstanding performance in each quarter, despite market volatility and macroeconomic uncertainty, shows how well it manages its business.
The cherry on the cake is that the company is the Dividend King, increasing its dividend for 60 consecutive years. Let's take a look at the first-quarter results and determine why this company is a great stock to buy and hold.
Having a diversified business
Johnson & Johnson's popular brands - Listerine, Neutrogena, Benadryl, and others - remain customer favorites. But the real secret to JNJ's stability lies in the sheer diversity of its business operations, which formally consist of three segments - consumer, pharmaceutical, and medical devices. In turbulent times, these segments balanced each other out, generating stable revenues.
Recently, however, JNJ has made some changes to its business. To focus more on its core healthcare business, namely pharmaceuticals and medical devices, JNJ is in the process of spinning off its consumer healthcare segment into a new, publicly-traded company.
As of the first quarter, the company also reclassified certain international over-the-counter drugs from the pharmaceutical segment into a separate consumer healthcare segment. The medical device segment has now been renamed MedTech.
Some drugs from the company's pharmaceutical segment are widely popular in the marketplace. These include the immunology drug Stelara, whose international sales grew 18% year over year to $2.3 billion in the first quarter. And Tremfya, a drug for adults with moderate to severe plaque psoriasis, posted an impressive 44% year-over-year increase in sales to more than $590 million in the first quarter.
Oncology drugs Darzalex and Erleada also increased total revenue for the year by $2.2 billion and posted outstanding year-over-year growth, reflecting growing demand. Sales of Darzalex used to treat multiple myeloma, were up 38% for the year in the United States. Erleada is used to treat prostate cancer; U.S. sales of the drug are up 20% from first-quarter 2021 levels.
Invega's neuro drug Trinza used to treat schizophrenia in adults, brought in another $1 billion in revenue for the quarter. JNJ also generated $457 million from sales of its COVID-19 vaccine, used to prevent coronavirus.
Outstanding financial performance
Total first-quarter sales rose 5% to $23.4 billion and earnings per share rose 3% to $2.67. CEO Joaquin Duato said in a press release, "Our first-quarter results show strong performance across the enterprise despite macroeconomic factors.
The largest contributor to total sales ($12.8 billion) was the company's pharmaceutical segment, which boasts a portfolio of quality drugs, showing a 6.3 percent year-over-year increase.
The medical devices segment, which makes a range of products from those used to repair joints and injuries to sports medicine and biomaterials, saw a 6% growth in the first quarter to $7 billion for the year.
Company executives said that due to supply and demand uncertainties, JNJ has suspended sales projections for its COVID-19 vaccine.
Total sales are expected to be between $94.8 billion and $95.8 billion, down slightly from the previous forecast of $95.9-96.9 billion. Adjusted earnings per share could also be between $10.15 and $10.35, rather than the $10.40-10.60 previously projected.
Hard-earned Dividend King status
It's no surprise that the company has earned the title of Dividend King. Its consistent dividend payout over 60 consecutive years is a testament to the strength of its business on a global scale.
Along with the results, JNJ also announced a 6.6% increase in its quarterly dividend to $1.13 per share. This is the company's 60th consecutive annual dividend increase.
The company's efforts to grow its business through new, innovative products and drugs are why Johnson & Johnson is worth investing in. Its research and development spending rose 10% from a year ago to $3.4 billion in the first quarter. The company also plans to compete with Intuitive Surgical in the robotic surgery segment. Intuitive has a monopoly in this segment thanks to its state-of-the-art da Vinci robotic system.
JNJ unveiled its Ottava robotic-assisted surgery system in November 2021. Company executives didn't talk much about it in their first-quarter results.
It is a safe health care stock for investors who want to see their money grow, as well as receive regular dividend income.
As long as the price is above 174.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 183.33
- Take Profit 1: 187.00
- Take Profit 2: 190.00
Alternative scenario:
If the level of 174.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 174.00
- Take Profit 1: 167.90
- Take-profit 2: 162.60
