This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Johnson & Johnson Remains Too Big to Succeed

NEW YORK ( TheStreet) -- Few stock sectors are as reliable as drugs and health care, and astute investors know that companies such as Merck (MRK), Pfizer (PFE) and Abbott Laboratories (ABT) have delivered healthy returns over the years.

One stock that investors have become less enamored with, however, is Johnson & Johnson (JNJ - Get Report).

Johnson and Johnson

The company has made recent mistakes, including product recalls, and its stock performance has been uninspiring for the most part.

Johnson & Johnson's first quarter was not so healthy, even though its numbers beat analysts' estimates.

Revenue was $16.1 billion, down slightly from the same quarter a year before.

Earnings were $3.8 billion, or $1.37 a share, up 1.5% from a year before.

But the headline numbers obscured some disappointing details.

Revenue from the U.S. declined by 5.1%.

The only unit that showed growth was business pharmaceutical sales, while consumer sales and medical devices declined by 2.4% and 0.3%, respectively.

Also disappointing was that management offered full-year EPS guidance of a conservative $5.07 to $5.17.

This failed to dispel concerns about litigation costs related to Johnson & Johnson's DePuy medical device unit.

Johnson & Johnson seems to have taken a "we know best" attitude when it comes to Wall Street's wish that it break itself into smaller and -- it is hoped -- more valuable parts.

Management's insistence on keeping the company one large conglomerate could make it lose loyal investors.

In fact, this insistence is remarkable when rivals Pfizer and Abbott Laboratories have enjoyed positive results from opting to separate their businesses.

Although I'd like to give Johnson & Johnson the benefit of the doubt on this issue because it's been in business so long, the company has yet to prove that it can make a solid turnaround as long as it stays "too big to succeed." Bottom Line

As dominant as Johnson & Johnson has been over the past several decades, it has stumbled repeatedly over the past five years.

Although Johnson & Johnson's shares are slightly less expensive than Pfizer's (PFE), its growth doesn't support its having a higher price-to-earnings multiple than Novartis (NVS) or Covidien (COV).
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
JNJ $101.81 0.11%
AAPL $93.79 0.10%
FB $101.98 0.07%
GOOG $682.32 -0.12%
TSLA $150.99 0.35%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs