Johnson & Johnson Earnings: Maintaining Fair Value Estimate Despite Heavy Stelara Hit in 2025

Key Morningstar Metrics for Johnson & Johnson

• Fair Value Estimate: $164.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Low

What We Thought of Johnson & Johnson’s Earnings

Johnson & Johnson JNJ reported 4.3% top-line growth in 2024, or 7% growth at constant currencies and excluding covid-19 vaccine sales. Assuming the Intra-Cellular ITCI acquisition closes in the second quarter, we think J&J’s 2025 guidance implies $90.3 billion in revenue (1.7% growth) and $10.30 adjusted EPS (3.6% growth).

Why it matters: The market was anchoring on at least 3% revenue growth guidance for 2025, but foreign exchange headwinds are likely to be a drag on growth, and the Intra-Cellular acquisition is also having a dilutive effect on earnings in the near term.

• Investors are watching biosimilar competition with immunology drug Stelara, which extended to the key US market in January. We assume a more than $3 billion decline in global Stelara sales in 2025.
• J&J’s 2025 results will be the launching point for its guidance of 5%-7% revenue growth for 2025-30, which is still well ahead of our assumed 2.5% average annual growth over this period.

The bottom line: We’re maintaining our fair value estimate of $164 per share following relatively in-line results for 2024 and an expected slowing of growth in 2025 as Stelara faces biosimilars. We expect a hearing in February to begin to erode the overhang on J&J shares from talc litigation.

Long view: We’re watching several products across J&J’s portfolio as we assess whether its long-term guidance is achievable, which could provide upside to our fair value estimate.

• In innovative medicine, J&J will need to see dominance for its multiple myeloma portfolio, expanded use of Intra-Cellular neurology drug Caplyta, and solid new drug launches, including oncology drug TAR-200 and immunology drug icotrokinra.
• In medtech, J&J’s pulsed field ablation system Varipulse will need to prove competitive in the high-growth atrial filbrillation market against offerings from Boston Scientific BSX and Medtronic MDT, and J&J will also need to see significant penetration for its Ottava and Velys robotic surgery systems.