Analyst Note| Damien Conover, CFA |
Johnson & Johnson reported solid first-quarter results that were slightly ahead of our and Visible Alpha consensus expectations, but we don’t expect any major changes to our fair value estimate based on the minor outperformance. Importantly, the firm’s more elective products in orthopedics continue to return to normal after COVID-19 concerns weighed heavily on joint-replacement procedures in 2020. Even though knee procedures still appear under pressure, this area is viewed as one of the most elective surgeries and will likely trend toward normal later this year. We believe the high switching costs (doctors investing time to learn a competitor's product) will likely support consistent orthopedic market share as sales rebound, which also supports the firm’s wide moat along with the strong intangible assets in the drug and consumer groups.