Markets have continued to sell off this week as investors digest ensuing tariff implications and rising geopolitical tensions. That said, one stock that continues to stand out is Johnson & Johnson JNJ.
The pharmaceutical giant's stock hit new 52-week highs of nearly $170 on Tuesday, with JNJ now up +16% year to date. Seemingly acting as a defensive hedge against recent market volatility, let's see if it's time to buy JNJ shares for higher highs.
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Of course, medical stocks are often sought during broader economic uncertainty as the essentiality of healthcare doesn’t waver.
What strengthens Johnson & Johnson’s defensive capabilities is the company’s diversification within the medical sector. Johnson & Johnson provides a wide range of pharmaceuticals across several therapeutic areas including oncology, immunology, and neuroscience among others.
In addition to this, Johnson & Johnson’s medical device division offers solutions and operational equipment for orthopedics, advanced surgical procedures, and vision care. Bringing in $88.82 billion in 2024, Johnson & Johnson's top line is expected to rise 1% this year and is projected to increase another 3% in fiscal 2026 to $92.8 billion.
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More intriguing, Johnson & Johnson’s annual earnings are slated to rise 6% this year to $10.58 per share, compared to EPS of $9.98 in 2024. Plus, FY26 EPS is projected to increase another 4%.
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At current levels, JNJ still trades at a very reasonable 15.8X forward earnings multiple. This is a noticeable discount to the benchmark S&P 500’s 22X and its Zacks Large Cap Pharmaceuticals Industry average of 18.1X, with some other notable names in the space being AbbVie ABBV, Eli Lilly LLY and Pfizer PFE.
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JNJ also trades beneath its decade-long median of 16.4X forward earnings with a high of 20.1X over the last 10 years. Less prone to major fluctuations in its valuation, it’s noteworthy that JNJ has a beta ratio under 1.0 (0.47) which suggests this stock should be less volatile than the benchmark when considering market risk.
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Bottom Line
After such a sharp YTD rally, Johnson & Johnson stock lands a Zacks Rank #3 (Hold). Near 52-week peaks there could be better buying opportunities for JNJ shares but higher highs wouldn’t be surprising.
To that point, investors may be compelled to hold JNJ as a hedge against recent market volatility, especially considering Johnson & Johnson’s steady growth and reasonable valuation.
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This article originally published on Zacks Investment Research (zacks.com).
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