Johnson & Johnson - Stocks

Instrument description

Consumer goods not only fulfill the needs and wants of the general population but it is also a major part of the global economy. Consumer goods are a wide domain that includes a variety of segments such as food and beverage, cosmetics, electronic devices, household items and appliances, medicines, apparel, jewelry, office supplies, and many other things. Consumer goods serve a particular purpose and readily available for people to buy and use.

Johnson & Johnson is one of the most popular American multinational company that has global success in production, marketing, and distribution of consumer healthcare products, pharmaceutical goods, and medical devices. Johnson & Johnson is a popular household brand not only in the US but in all parts of the world. The company is most famous for making premium baby care products that are the first choice of many parents everywhere.

Johnson & Johnson has been one of the most financially stable business company and has raised the dividend consecutively for 55 years. Johnson & Johnson is one of the two American company that has a Triple-A credit rating. Some of the renowned products of Johnson & Johnson include Johnson’s Baby products, Clean & Clear face wash, Neutrogena, Neostrata, Tylenol, Benadryl, Band-Aid, Listerine, Visine, Splenda, and Acuvue contact lenses.

Johnson & Johnson is a big conglomerate that is based in New Brunswick, New Jersey, and has over 250 subsidiaries that are based in almost 60 countries. The numerous products of the company are sold in more than 175 countries. Johnson & Johnson has almost 132,200 employees.

History of Johnson & Johnson

Johnson & Johnson was founded in 1886 by three brothers named Edward Mead Johnson Sr., James Wood Johnson, and Robert Wood Johnson. Earlier in 1885, the brothers made ready to use surgical dressings. The company was incorporated in 1887. Johnson’s Baby Powder was introduced in 1893. The famous Band-Aid bandages were launched in 1921. Johnson & Johnson expanded to Europe with the formation of Johnson & Johnson Limited in the UK in 1924.

The company got listed on the New York Stock Exchange (NYSE) in 1944 and gradually started to expand its business to South America, Europe, Asia, and Africa. In 1959, Johnson & Johnson acquired Cilag AG, which produced pharmaceutical goods and which later became the hallmark of the pharmaceutical division of Johnson & Johnson.

Also in 1959, the company acquired McNeil Laboratories Inc., and in the following year, the popular Tylenol is launched and marketed as over the counter (OTC) medicine for pain. In 1962, Johnson & Johnson acquired Janssen Pharmaceutica.

In 1975, Tylenol was produced on a massive scale due to a considerable price decrease. In 1988, Johnson & Johnson introduced the Acuvue disposable contact lenses. In 1989, Johnson & Johnson did a joint venture with Merck to produce and deliver an OTC version of Merck’s prescription medicine.

In 1994, Johnson & Johnson bought Neutrogena Corporation, and in 1995, Johnson & Johnson Pepcid AC, along with Merck took hold of the clinical diagnostic unit of Eastman Kodak Company. Johnson & Johnson took control of Cordis Corporation in 1996. Johnson & Johnson goes through restructuring in 1998 and also acquired DePuy Inc. In 1999, Janssen Biotech Inc., formerly called Centocor Inc. merged with Johnson & Johnson. In 2008, Johnson & Johnson bought Mentor Corporation for $1 billion and merged its operations with Ethicon.

Johnson & Johnson purchased consumer healthcare division (products such as Listerine, Visine, and Neosporin) of Pfizer in 2006, and it was the largest purchase of the company and worth $16.2 billion. In 2012, Johnson & Johnson made the second biggest purchase by acquiring Synthes for $22 billion, which made medical devices that are used to treat injuries.

Current Business and Investment of Johnson & Johnson

Johnson & Johnson is a multi-billion company with major focus and success in the healthcare sector of the market. Johnson & Johnson functions in three vital segments that are consumer goods, medical devices, and pharmaceuticals.

• Consumer Goods segment is one of the main unit of the company and include a range of products. The company is known for delivering quality baby care, skincare, oral care, women healthcare, wound care, and over the counter products. Some of the popular brands in this segment are Baby Products (Shampoo, oil, lotion, and powder), Clear & Clean, Johnson’s, and Le Petite Marseillais.
• The Medical Devices unit is quite extensive and deals with producing products for cardiovascular, orthopedic, surgical, eye, and diabetic care.
• The Pharmaceutical division manages five therapeutic areas that include immunology, oncology, neuroscience, cardiovascular, and infectious and metabolic diseases.

The Pharmaceutical division accounts for more than 50% of the total revenue of the company, followed by Medical Devices at 40%, and Consumer Goods division at 10%. The profits and increasing number of sales in all the three divisions are the results of decades of research done by Johnson & Johnson. The company files for approval of new drugs up to four years in advance. By 2023, Johnson & Johnson is expected to peak revenue with $1 billion.

Johnson & Johnson makes heavy investments in Research and Development (R&D) and has research facilities in many countries such as the US, Brazil, Canada, Belgium, Singapore, Japan, Germany, Netherlands, UK, and China. The healthcare products that Johnson & Johnson makes are used in hospitals, medical clinics, and households.

Johnson & Johnson takes pride in running several Corporate Social Responsibility (CSR) campaigns. The company has clearly stated that its priority is providing suitable products and services to the mothers, fathers, patients, doctors, and nurses who use them. The company is constantly striving to reduce costs to maintain the cost-effectiveness of its products. Johnson & Johnson has been instrumental in the field of healthcare and done numerous work to help diabetic patients, help injured people to walk, help the deaf people to hear, and reduce the impacts of AIDS (Acquired Immunodeficiency Syndrome).

Being a big brand in the healthcare sector, Johnson & Johnson puts $1 billion for the development of a vaccine (not for profit) for the Coronavirus pandemic along with Biomedical Advanced Research and Development Authority (BARDA), US Department of Health and Human Services, and Assistant Secretary for Preparedness and Response (ASPR).

The clinical trials of the developed vaccine are announced to start in September 2020, and in July, Johnson & Johnson said to deliver 300 million doses of vaccine to the US. In August 2020, the US government also said to give financial assistance of $1 billion for the production of the Covid-19 vaccine. The demand for Tylenol increased two to four times around the world, and production was increased in March 2020.

Risk and Potential in Johnson & Johnson Environment

Johnson & Johnson is one of the most valuable business companies in the world, and in 2018 was ranked 37 in Fortune 500 as the largest US Corporation based on total revenue. The company posted revenue of $82.059 billion in 2019, along with an operating income of $17.33 billion and a net income of $15.119 billion in 2019. SWOT analysis is a common tool used by business companies to evaluate their performance and efficiency. Johnson & Johnson is a trusted global brand in provision of healthcare products and services to customers and clients all over the world. The SWOT analysis of Johnson & Johnson is

• Strengths

Johnson & Johnson is one of the most valuable and trusted brands in the world. United Nations also acknowledged the services of Johnson & Johnson and awarded them the ‘Humanitarian of the Year Award’ for their part in a campaign called ‘Healthy Mother and Healthy Child Initiative.’ Johnson & Johnson delivers its quality products in all parts of the world. The company has a strong presence in print and online media due to its purposeful advertising. Johnson & Johnson manages an excellent distribution network. The company has done many strategic and valuable acquisitions and mergers over the years to diversify its portfolio.

• Weaknesses

Johnson & Johnson is considered a global leader in the health care segment, but the company also has to face bigger problems due to market fluctuation and constant change in the price of raw materials. The company also had to face litigations and conflicts with partner companies.

• Opportunities

Johnson & Johnson has the opportunity to acquire smaller companies that have potential and comply with high standards of the company. The company can develop more portable products and increase its offerings in the rural population. We live in a world where the majority of people across the globe have become conscious about their health, which is ideal for Johnson & Johnson to market and sell its goods. The company can partner with schools, colleges, hospitals, and corporate offices to run a health campaign.

• Threats

Johnson & Johnson faces a tough challenge to remain a market leader as many times, carcinogenic substances have been reported in the products. The company also had to make a product recall almost 40 of its medicine that affected its reputation. One of the strongest challenges for the company is countering the fake and counterfeit products along with cheap substitutes. The government rules and policies also impact the financial health of Johnson & Johnson. The competitors of Johnson & Johnson include Unilever, Procter & Gamble, Abbot, and Reckitt Benckiser.

Stock Analysis of Johnson & Johnson

Johnson & Johnson is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘JNJ.’ The company is listed under the ‘Health Technology’ Sector, and the industry is ‘Pharmaceuticals: Major.’ Johnson & Johnson is also a member of other indices such as the Dow Jones Industrial Average (DJIA), S&P-100 Index, and S&P-500 Index.

The all-time high share price of Johnson & Johnson was $155.51 on April 23, 2020, and the average price in the last 52 weeks is $140.32.

The Coronavirus impacted the business of Johnson & Johnson, and the company’s stock value fell in March 2020, but the announcement of the Covid-19 vaccine increased the share price. But the Coronavirus continues to be a threat for businesses, although the restrictions have been relaxed, and businesses have started to resume. The financial health of Johnson & Johnson has been down since last year due to ongoing litigation cases.

The sales of drugs increased and were $10.75 billion, with a 2.1% increase, but the Consumer goods sale fell 7% to $3.3 billion. The Medical Devices unit also suffered from a decline of $4.29 billion at nearly 40%. The total revenue of Johnson & Johnson declined to $18.34 billion, with a 10.8% decrease, and Earnings per Share (EPS) fell $1.67 at 35.3%. The financial aspects of Johnson & Johnson do seem to improve at the end of the second quarter, but the litigation risk still lingers on, and analysts predict that earnings and sales will decline in the third quarter of 2020. The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.