Johnson & Johnson Is One of Our Stock Picks for 2022

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This article is an excerpt from Barron’s 10 favorite stocks for 2022, published on Dec. 17. To see the full list, click here.

Johnson & Johnson

is shaking off its stodgy image as it moves to develop a broad and underappreciated drug portfolio and spin off its consumer business.

The stock, now priced around $173, trades for a reasonable 17 times projected 2022 earnings of $10.38 a share and has a secure 2.5% dividend yield.

The world’s largest healthcare company recently spent a day highlighting opportunities among its existing drugs and its pipeline. These include Darzalex for multiple myeloma, Tremfya for psoriasis, and Rybrevant for lung cancer.

Johnson & Johnson (ticker: JNJ) aims to expand its pharmaceutical sales by 5% annually, to $60 billion, by 2025 and have 13 drugs with annual sales of $1 billion or more.

Some analysts came away impressed. Citi Research’s Joanne Wuensch lauded the “breadth and depth” of the drug portfolio. She has a Buy rating and $192 price target. J&J is also a big producer of medical devices.

The spinoff of the consumer products business, which includes Tylenol, Listerine, and Band-Aids, may not add a lot of value, however. And the company’s potential legal liability for talc and opioids remains a risk.

Some investors would like to see Johnson & Johnson ramp up a small buyback program, given its earnings power and conservative balance sheet. J&J boasts one of only two triple-A credit ratings among U.S. corporations.

Microsoft

(MSFT) has the other.

Company / Ticker	Recent Price	YTD Change	2021E EPS	2022E EPS	2022E P/E	Dividend Yield	Market Value (bil)
Amazon.com / AMZN	$3,377.42	4%	$41.11	$51.37	65.7	None	$1,713
AT&T / T	23.71	-18	3.38	3.17	7.5	8.8%	169
Berkshire Hathaway / BRK.A	454,550.00	31	17,466.30	18,928.50	24.0	None	673
General Motors / GM	58.39	40	6.73	6.93	8.4	None	85
Hertz Global Holdings / HTZ	21.01	-22*	4.02	2.55	8.2	None	10
IBM / IBM	125.93	5	10.05	11.04	11.4	5.2	113
Johnson & Johnson / JNJ	173.01	10	9.83	10.38	16.7	2.5	455
Nordstrom / JWN**	20.05	-36	1.27	1.99	10.1	None	3
Royal Dutch Shell / RDS.B	42.82	27	4.86	6.19	6.9	3.9	166
Visa / V***	214.37	-2	5.91A	7.04	30.5	0.7	467

*Since July 1. **Estimates for Jan. 2022 and Jan. 2023 fiscal year ends. ***Sept. fiscal year end. E=estimate. A=actual.

Source: FactSet

Write to Andrew Bary at [email protected]