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Here's How to Play JNJ Stock as it Announces $55B US Investment Plan
JNJJ&J(JNJ) ZACKS·2025-03-24 11:35

Core Viewpoint - Johnson & Johnson (J&J) plans to invest over 55billionintheU.S.overthenextfouryearstoexpanditsmanufacturingcapabilities,markinga2555 billion in the U.S. over the next four years to expand its manufacturing capabilities, marking a 25% increase compared to the previous four years [1][2] Investment Plans - The investment will initiate with a high-tech facility in North Carolina and include three new advanced manufacturing facilities, along with expansions of existing plants in its Innovative Medicine and MedTech sectors [1][2] Business Model Strengths - J&J's diversified business model is a significant strength, operating through pharmaceuticals and medical devices with over 275 subsidiaries, which helps it withstand economic cycles [4] - The company has 26 platforms with annual sales exceeding 1 billion and maintains one of the largest R&D budgets in the pharmaceutical industry [4] Innovative Medicine Segment - The Innovative Medicine unit is showing consistent growth, with sales increasing by 5.8% in 2024 on an organic basis [6] - J&J anticipates generating over 57billioninsalesfromthissegmentin2025,withexpectedgrowthof5−757 billion in sales from this segment in 2025, with expected growth of 5-7% from 2025 to 2030 [7] - Ten new products in the Innovative Medicine pipeline are projected to deliver peak non-risk-adjusted operational sales of 5 billion [7] Challenges in Innovative Medicine - The loss of patent exclusivity for Stelara in 2025, which generated 10.36billioninsalesin2024,isexpectedtosignificantlyimpactsalesduetotheintroductionofgenerics[8]−Additionalchallengesincludea10.36 billion in sales in 2024, is expected to significantly impact sales due to the introduction of generics [8] - Additional challenges include a 2 billion impact from the Medicare Part D redesign and adverse currency fluctuations [9] MedTech Segment Performance - J&J's MedTech sales are facing challenges, particularly in the Asia Pacific region, with significant impacts from China's volume-based procurement program and competitive pressures [10][11] - Despite these challenges, J&J is shifting its MedTech portfolio towards high-innovation markets, particularly in Cardiovascular, following recent acquisitions [12] Legal Issues - J&J is dealing with over 62,000 lawsuits related to its talc-based products, with a proposed settlement plan of approximately 6.5billiontoresolvemostclaims[13][14]−Thecompanyhasfiledforbankruptcythroughasubsidiarytofacilitatetheresolutionoftheselawsuits,withacommitmenttoincreasesettlementfundstoapproximately6.5 billion to resolve most claims [13][14] - The company has filed for bankruptcy through a subsidiary to facilitate the resolution of these lawsuits, with a commitment to increase settlement funds to approximately 8 billion [15] Stock Performance and Valuation - J&J's stock has outperformed the industry, rising 13.1% year-to-date compared to the industry's 6.3% growth [16] - The stock is trading at a price/earnings ratio of 15.30, slightly below the industry average of 16.69 [19] - The Zacks Consensus Estimate for 2025 earnings has increased from 10.48to10.48 to 10.58 per share over the past month [22] Future Outlook - J&J's Innovative Medicines segment shows a positive growth trend, supported by a strong R&D pipeline and recent acquisitions [24] - However, challenges from the MedTech unit, the Stelara patent cliff, and the Medicare Part D redesign are significant headwinds anticipated in 2025 [25]