Johnson & Johnson Earnings: Surpassing Expectations Across the Board

Key Morningstar Metrics for Johnson & Johnson

• Fair Value Estimate: $172.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Low

What We Thought of Johnson & Johnson’s Earnings

In the second quarter, Johnson & Johnson JNJ saw 4.6% constant currency sales growth and a 1.8% decline in adjusted diluted EPS. Management raised its 2025 guidance for constant currency revenue growth (to 4.8% at the midpoint from 3.8%) and adjusted diluted EPS growth (to 8.7% from 6.2%).

Why it matters: Johnson & Johnson is facing a steep patent cliff this year due to biosimilar competition for its immunology blockbuster Stelara. The company’s strong growth despite this headwind is a testament to its diversified business and foundation of differentiated treatments.

• Within the innovative medicine segment (3.8% constant currency growth), strength in neurology (Spravato, Carvykti), oncology (Darzalex, Carvykti), and immunology (Tremfya) was broadly above our expectations. This was driven by demand, which we think is encouraging for long-term growth.
• In medtech (6.1% growth), double-digit growth in cardiology, with multiple launches across electrophysiology and the recent Abiomed and Shockwave acquisitions, was also above our expectations and countered a slight decline in orthopedics.

The bottom line: We’ve raised our fair value estimate to $172 per share from $164 after slightly increasing our growth trajectories for several drugs and devices that have strong long-term outlooks.

• On tariffs, Johnson & Johnson’s exposure has lessened due to reduced China medtech levies. While we continue to watch for updates on potential pharmaceutical tariffs, we think the company is in a good position, with most US-bound products already made in the United States and a plan for complete coverage within five years.

Coming up: We expect Johnson & Johnson’s pipeline to begin to significantly contribute to growth by next year, with new products like Imaavy (approved in myasthenia gravis) and upcoming expected approvals for TAR-200 (bladder cancer) and Caplyta (new indication in major depressive disorder).