Cramer: Johnson & Johnson (JNJ) Deal Will Lead to Huge Buyback

NEW YORK (TheStreet) -- TheStreet's Jim Cramer says Johnson & Johnson's (JNJ) 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.

Must Read: Cramer: JNJ Deal Will Lead to a Buyback and Much More Upside

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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Separately, TheStreet Ratings team rates JOHNSON & JOHNSON as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate JOHNSON & JOHNSON (JNJ) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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