Will Johnson & Johnson (JNJ) Stock Benefit From Cordis Unit Sale?

NEW YORK (TheStreet) -- Johnson & Johnson (JNJ) will seek a buyer for its Cordis unit, a business that makes medical devices including stents and catheters, sources say, in the latest move by the health care company to reduce its wide ranging portfolio, the Wall Street Journal reports.

The business could be worth between $1.5 billion and $2 billion, and is expected to attract interest from private-equity firms and other healthcare companies, sources added.

Shares of Johnson & Johnson closed at $102.95 yesterday.

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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, increase in stock price during the past year, growth in earnings per share and increase 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:

  • The revenue growth came in higher than the industry average of 4.6%. Since the same quarter one year prior, revenues slightly increased by 9.1%. 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 0.22 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 1.80, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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 13.5% 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 ($5.92 versus $4.82).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Pharmaceuticals industry average. The net income increased by 12.9% when compared to the same quarter one year prior, going from $3,833.00 million to $4,326.00 million.
  • You can view the full analysis from the report here: JNJ Ratings Report
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