Rating Change #1
Johnson & Johnson (JNJ) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 4.3%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, JNJ has a quick ratio of 1.88, which demonstrates the ability of the company to cover short-term liquidity needs.
- JOHNSON & JOHNSON has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, JOHNSON & JOHNSON reported lower earnings of $3.48 versus $4.78 in the prior year. This year, the market expects an improvement in earnings ($5.10 versus $3.48).
- The gross profit margin for JOHNSON & JOHNSON is currently very high, coming in at 72.40%. Regardless of JNJ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, JNJ's net profit margin of 1.30% is significantly lower than the same period one year prior.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
Johnson & Johnson engages in the research, development, manufacture, and sale of various products in the health care field worldwide. The company has a P/E ratio of 18.8, above the average drugs industry P/E ratio of 15.9 and above the S&P 500 P/E ratio of 17.7. Johnson & Johnson has a market cap of $177.51 billion and is part of the health care sector and drugs industry. Shares are down 0.1% year to date as of the close of trading on Friday.You can view the full Johnson & Johnson Ratings Report or get investment ideas from our investment research center. -- Reported by Kevin Baker in Jupiter, Fla.
For additional Investment Research check out our Ratings Research Center. For all other upgrades and downgrades made by TheStreet Ratings Model today check out our upgrades and downgrades list.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV