CA - Johnson & Johnson Q1 Earnings Preview: Shockwave Could Be A Good Fit Despite Headwinds

2024-04-11 07:30:31 ET

Summary

• Pharmaceuticals and medical devices giant Johnson & Johnson will report its first quarter 2024 results on Tuesday, April 16.
• In this earnings preview, I share my thoughts on JNJ's previous earnings and what can be expected from the upcoming report.
• I also discuss the acquisition of Shockwave Medical, which, at 70 times earnings and 13 times sales, seems very expensive.
• In particular, I examine JNJ's latest move in light of the company's acquisition-related track record. After all, Johnson & Johnson has spent more than $72 billion on acquisitions since 2012.
• Finally, I provide a brief valuation update and share whether I think JNJ stock is a good buy ahead of Q1 earnings.

Introduction

The shares of pharmaceutical and medical technology giant Johnson & Johnson ( JNJ ) have had a rather sobering performance over the last couple of years and lagged the broader market. Of course, it is currently difficult for a "boring" value stock of a blue-chip company to catch much of a bid, as the focus is still on the current growth darlings (artificial intelligence). However, it's not just the lack of investor interest that is plaguing Johnson & Johnson's stock. The talk litigation overhang ( see my in-depth article ) isn't exactly helping sentiment, and I get the impression that this "healthcare mutual fund" - what some view JNJ as - is losing its appeal with risk-averse investors who appreciated the three-pronged strategy (pharmaceuticals, medical devices, consumer health). Recall that JNJ split off its consumer health business Kenvue, Inc. ( KVUE , which I also cover here on Seeking Alpha ) last year. Finally, the upcoming loss of exclusivity (LOE) of key pharmaceutical assets somewhat clouds the future of the Innovative Medicine (formerly Pharmaceuticals) segment (Figure 1, Table 1)....

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