One-Time Tax Charge Affected Bottomline: Johnson & Johnson

Growth in business still observable despite some declining pharmaceutical products

Shares of Johnson & Johnson or JNJ, $348 billion healthcare company, recently fell more than 12% from its all-time highs and now traded at $129.53/share.

JNJ recently reported its fourth quarter and full year results. JNJ reported 6.3% rise in revenue but a whopping 92% drop in profits. Most profit loss was related to a nearly $13 billion tax costs in relation to the tax reform. But prior to the tax costs, JNJ already had increase operating costs that gave it lower earnings in 2017.

“Johnson & Johnson delivered strong adjusted earnings per share growth of 8.5% and total shareholder return of greater than 24% in 2017, driven by the robust performance of our Pharmaceutical business, while continuing to make investments in acquisitions, innovation and strategic partnerships to accelerate growth in each of our businesses.

“As we enter 2018 and look beyond, we are experiencing an incredible pace of change in health care. Johnson & Johnson is uniquely positioned to lead during this dynamic era and deliver innovative solutions for patients and consumers that drive sustainable, long-term growth. We are pleased with the passage of recent legislation modernizing the U.S. tax system, which enables Johnson & Johnson to invest in innovation at higher levels to help address the most challenging unmet medical needs facing health care today.”

“I want to thank all of our talented colleagues for their commitment, passion and dedication to transforming the lives of patients and consumers worldwide.”

Alex Gorsky, Chairman and Chief Executive Officer

Most pharmaceutical products of JNJ’s exhibited steady growth except for reduction in world wide sales on Remicade (-9.3%; -$651 mil), Other infectious diseases (-21%; -$165 mil), Concerta (-8.3%; -$72 mil), Risperdal (-9.9%; -$88 mil), Other neuroscience (-13.9%; -$294 mil), Invokana (-21%; -$296 mil), Procrit (-12%; -$133 mil), and Diabetes care (-9.7%; -$174 mil).

Balance sheet figures were not available at the time of writing. Meanwhile, JNJ had $35.2 billion in debt (0.5x debt-equity) and a book value of $74 billion as of September 2017.

In the past three fiscal years, JNJ allocated $31.7 billion in financing activities and generated $46 billion in free cash flow.

Analysts have an average price target of $148.91/share vs. $129.53 at the time of writing. Conservative calculations gave a per share figure of $105/share.

Disclosure: I have shares in JNJ

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