Johnson & Johnson‘s (JNJ) coronavirus vaccine won emergency use authorization in the U.S. in late February, helping JNJ stock to rise higher.
In the three days prior to its authorization, an advisory committee endorsed the vaccine for authorization in a unanimous vote. The Food and Drug Administration then officially authorized the vaccine. A day later another advisory panel to the Centers for Disease Control and Prevention blessed the vaccine. Shipments began the next day, on March 1.
But news emerged soon after that Johnson & Johnson would need to enlist Merck (MRK) to help it manufacture enough supply in the U.S. One expert called the news “disappointing” given that J&J is one of the biggest makers of drugs in the world.
Johnson & Johnson’s coronavirus vaccine is the only single-shot regimen on the market. Pfizer (PFE) with partner BioNTech (BNTX) and Moderna (MRNA) have two-injection regimens authorized in the U.S. and other countries.
J&J’s shot is less effective at 66% overall. Pfizer’s and Moderna’s vaccines are 95% and 94.1% effective, respectively. But clinical testing shows it blocks 57% of Covid-19 cases due to a variant out of South Africa. Pfizer and Moderna have only been able to run lab tests against that mutation.
So, should investors consider taking on JNJ stock now?
JNJ Stock Fundamental Analysis: Not A CAN SLIM Stock
Johnson & Johnson is the No. 1 diversified medical stock by market cap.
Among its wares are immunology, oncology and neuroscience drugs. In the fourth quarter, those three segments generated more than three-quarters of J&J’s total drug sales. Operationally and on a strict as-reported basis, all three units grew.
All told, Johnson & Johnson’s drug sales increased 16.3% to $12.27 billion. Operationally, drug sales rose 14.6%.
The coronavirus pandemic hurt sales of medical devices and consumer health products. Consumer health sales inched up 1.4% to $3.62 billion. But medical device sales fell 0.7% to $6.59 billion.
Total revenue grew 8.3% to $22.48 billion. Adjusted earnings declined 1.1% to $1.86 per share.
Neither metric is in line with CAN SLIM rules of investing. Savvy investors look for companies with recent earnings and sales growth of at least 25%. JNJ stock simply isn’t there.
And J&J isn’t expected to get there in the first quarter. Analysts polled by FactSet call for adjusted profit of $2.32 a share on $21.99 billion in sales, up a respective 1% and 6%.
What Does 2020 Say About JNJ Stock?
Last year, the pharmaceutical company reported 0.6% growth across all products, roughly in line with 1% sales growth in the prior year.
During its fourth-quarter 2020 report, Johnson & Johnson guided to $90.5 billion to $91.7 billion in full-year 2021 sales. Adjusted earnings are expected to come in at $9.40-$9.60 per share.
Johnson & Johnson Technical Analysis
Shares of J&J have a weak Investor’s Business Daily Composite Rating of 44 out of a best-possible 99. The CR scores a stock’s key growth metrics against all other stocks regardless of industry group. So in terms of key growth measures, JNJ stock ranks just below the top one-half of all stocks.
(Related: Does your favorite stock get a pass or fail rating from IBD Digital?)
J&J stock also has an IBD Relative Strength Rating of 37. The RS Rating measures a stock’s 12-month performance on a 1-99 scale against all other stocks. Most big winners have an RS Rating of 80 or higher before they break out on major price runs. This puts J&J shares behind leading stocks.
Johnson & Johnson Stock And The Opioid Crisis
There have been a number of settlements in the opioid crisis.
J&J also settled with two Ohio counties for $10 million. In addition, Johnson & Johnson will pay $5 million in legal fees and make $5.4 million in charitable giving, for a total payout of $20.4 million.
Also in 2019, a judge said Johnson & Johnson must pay $572 million to help abate Oklahoma’s opioid epidemic. Afterward, a judge lowered that payment to $465 million. Still, the pharmaceutical company argues the payment should be $355 million to account for out-of-court settlements.
More recently, in mid-September, New York state filed civil charges Thursday accusing the company of insurance fraud for downplaying the risks of opioid painkillers. The company denied the charges.
Litigation Weighs On The Pharma Company
In May, Johnson & Johnson said it would pull its baby powder brand from shelves in the U.S. and Canada amid “changes in consumer habits” and “misinformation around the safety of the product.” This will also help the company shift more resources to its coronavirus vaccine.
The safety of Johnson & Johnson’s baby powder has been called into question over recent years. A ruling by New Jersey’s appellate court revived at least two talcum power lawsuits in that state and could lead to other suits being reinstated.
JNJ stock fell more than 6% on a single day in October 2019 after an FDA test found trace amounts of asbestos in a single bottle of baby powder purchased online. J&J later said an investigation showed no asbestos in additional samples from that bottle and lot.
In December 2019, JNJ stock broke out following news of additional testing that found no asbestos.
JNJ Stock News: Coronavirus Vaccine Authorized
Johnson & Johnson just joined Pfizer and Moderna with an FDA-authorized coronavirus vaccine. The company sought FDA emergency use authorization in February. Later in the month, briefing documents suggested the FDA was on board with authorization.
An advisory committee on Feb. 26 debated the merits and risks of the vaccine. Ultimately, members of the committee voted unanimously to endorse the vaccine for people ages 18 and older.
In clinical testing, J&J’s vaccine was 66% protective overall against moderate to severe Covid-19. It also prevented 100% of hospitalizations and deaths. Promisingly the coronavirus vaccine is 72% effective in the U.S., 66% effective in Latin America and 57% effective in South Africa.
The South Africa point is bullish for JNJ stock. Only J&J and Novavax (NVAX) have been able to test their coronavirus vaccines in humans against a concerning variant out of South Africa. In comparison, Novavax said its vaccine was 48.6% effective in a Phase 2 test in South Africa.
The Johnson & Johnson Covid-19 jab is the only U.S. government-backed effort that requires only one shot. It also doesn’t have the same cold transportation and storage requirements of two-shot vaccines from Pfizer/BioNTech and Moderna.
News about the vaccine has prodded JNJ stock in the past. But President Joe Biden announced this month that his administration brokered a deal to allow Merck to help Johnson & Johnson make its vaccine. Biden said he learned J&J was behind in its manufacturing efforts when he took office.
Is JNJ Stock A Buy?
Johnson & Johnson stock isn’t a buy as of March 29. Investors are encouraged to a buy a stock when it’s no more than 5% above a buy point. JNJ stock has yet to top a new buy point.
But the company’s fundamentals are not strong, as litigation risk continues to complicate J&J’s future.
And for the current period, analysts expect earnings and sales to each rise by a single-digit percentage. That is not in line with CAN SLIM rules of investing. Investors should look for stocks with consistently growing quarterly sales and earnings.
Still, big companies like Johnson & Johnson can add gains without massive streaks of growth.
Keep an eye on news from Johnson & Johnson regarding its coronavirus vaccine, which could help shares of JNJ stock to rise.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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