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Johnson & Johnson: Updated Guidance Following Kenvue Divestment Consistent With Our Expectations

Image of a sign of the Johnson & Johnson logo.
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Johnson & Johnson
(JNJ)

Following the successful split-off of Johnson & Johnson’s JNJ consumer division, Kenvue, J&J provided updated 2023 guidance for the remaining J&J business largely in line with our expectations. We don’t expect any changes to the firm’s fair value estimate or wide moat rating based on the updated outlook. The 2023 earnings outlook for the remaining J&J business fell as expected due to the divested consumer business. However, the reduced share count from the Kenvue split-off combined with $13 billion in proceeds from the debt offering and partial initial public offering of Kenvue as well as the 9.5% remaining stake of Kenvue still held by J&J largely offset the lost Kenvue earnings from a valuation perspective.

From a strategic view, the remaining J&J business is now a more focused company, leading in the development and marketing of pharmaceuticals and medical devices. We believe the strong intangible assets in the pharmaceutical business and switching costs in the device segment (along with some intangible assets, as well) support a wide moat for J&J following the Kenvue divestment.

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The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Damien Conover

Sector Director
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Damien Conover, CFA, is the director of healthcare equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is also director of equity strategy, responsible for helping to shape, package, and surface research based on Morningstar’s investment philosophy by working closely with the firm’s sector strategists and directors.

Before joining Morningstar in 2007, Conover was an equity research analyst covering the healthcare sector for Raymond James, Bank of Montreal, and Tucker Anthony.

Conover holds bachelor’s and master’s degrees in finance from the University of Wisconsin and was a member of its Applied Security Analysis Program. He also holds the Chartered Financial Analyst® designation.

Damien Conover, CFA, is the director of healthcare equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is also director of equity strategy, responsible for helping to shape, package, and surface research based on Morningstar’s investment philosophy by working closely with the firm’s sector strategists and directors.

Before joining Morningstar in 2007, Conover was an equity research analyst covering the healthcare sector for Raymond James, Bank of Montreal, and Tucker Anthony.

Conover holds bachelor’s and master’s degrees in finance from the University of Wisconsin and was a member of its Applied Security Analysis Program. He also holds the Chartered Financial Analyst® designation.

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