NEW YORK (TheStreet) -- TheStreet's Jim Cramer says Johnson & Johnson's (JNJ - Get Report) deal to sell its Ortho-Clinical Diagnostics business to The Carlyle Group for $4 billion will lead to a buyback of "a huge amount of stock."
Cramer says Johnson & Johnson CEO Alex Gorsky set expectations very low for the quarter and this deal was done perfectly so that the company can announce in conjunction with its quarterly results a buyback that would "dwarf" Merck (MRK) and Pfizer (PFE). The stock is rising, but Cramer is not selling yet because he feels the increase will continue, the stock will surpass $100 and the buyback will shock people.
If one is looking to buy, Cramer says one could wait until Friday because a strong employment number could bring the drug stocks down; but otherwise, he believes Johnson & Johnson is not coming down.
- JNJ's revenue growth has slightly outpaced the industry average of 1.6%. Since the same quarter one year prior, revenues slightly increased by 4.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- JNJ's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, JNJ has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- JOHNSON & JOHNSON has improved earnings per share by 35.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, JOHNSON & JOHNSON increased its bottom line by earning $4.82 versus $3.87 in the prior year. This year, the market expects an improvement in earnings ($5.82 versus $4.82).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 37.1% when compared to the same quarter one year prior, rising from $2,567.00 million to $3,519.00 million.
- You can view the full analysis from the report here: JNJ Ratings Report