Last week, J&J JNJ announced plans to invest more than $55 billion over the next four years to expand its manufacturing footprint in the United States as the Trump administration considers imposing tariffs on pharmaceuticals.

This represents a 25% increase in investment compared to the previous four years. The investments begin with the groundbreaking of a high-tech facility in North Carolina. In addition, the company will build three new advanced manufacturing facilities and expand several existing plans across its Innovative Medicine and MedTech businesses.

The massive U.S. investments shift focus to J&J stock. However, investors should not make their investment decisions based on just on-off news. Let’s analyze the company’s strengths and weaknesses to gain a better understanding of how to play the stock.

J&J’s Diversified Business Model

Johnson & Johnson’s biggest strength lies in its diversified business model. It operates through pharmaceuticals and medical devices divisions. It has more than 275 subsidiaries, indicating that the business is extremely well-diversified. This diversification helps it withstand economic cycles more effectively. J&J has 26 platforms with annual sales exceeding $1 billion. Meanwhile, it has one of the largest R&D budgets among pharma companies.

J&J separated its Consumer Health business into a newly listed company called Kenvue KVUE in 2023, allowing it to focus on its core pharmaceutical and medical device businesses.

JNJ’s Innovative Medicine Unit Showing Consistent Strength

J&J’s Innovative Medicine unit is showing growth trend. The segment’s sales rose 5.8% in 2024 on an organic basis. In 2025, J&J expects growth in the Innovative Medicine segment despite the loss of exclusivity (LOE) for its multi-billion-dollar product Stelara, the approximately $2 billion negative impact of the Part D redesign and the greater effect of currency fluctuations. Growth is expected to be driven by its key products, such as Darzalex, Tremfya, Spravato and Erleada, as well as new drugs like Carvykti, Tecvayli and Talvey, and new indications for Tremfya and Rybrevant.

J&J expects to generate more than $57 billion in sales in the Innovative Medicines segment in 2025. It expects the Innovative Medicine business to grow 5-7% from 2025 to 2030.

Moreover, J&J believes 10 of its new Innovative Medicine products, including new cancer drugs like Talvey and Tecvayli, and pipeline candidates like nipocalimab and icotrokinra (JNJ-2113), have the potential to deliver peak non-risk-adjusted operational sales of $5 billion.

Patent Expiration of J&J’s Blockbuster Drug Stelara & Other Headwinds

J&J lost U.S. patent exclusivity of its blockbuster drug, Stelara, in 2025. Stelara generated sales of $10.36 billion in 2024. The launch of generics is expected to significantly erode the drug’s sales and hurt J&J’s sales and profits in 2025. A biosimilar version of Stelara was launched in certain European markets for certain indications in July 2024. Several biosimilar versions of Stelara are expected to be launched in the United States in 2025. Amgen AMGN launched the first Stelara biosimilar, Wezlana, in January 2025. Stelara biosimilar competition is expected to accelerate throughout 2025 as the number of biosimilar entrants increases.

In addition, sales in 2025 are expected to be hurt by greater Fx impact and approximately $2 billion impact from the Medicare Part D redesign.

Slowing Sales in J&J’s MedTech Segment

Sales in J&J’s MedTech business are facing continued headwinds in the Asia Pacific, specifically in China. Sales in China are being hurt by the impact of the volume-based procurement (VBP) program and the anticorruption campaign. VBP is a government-driven cost-containment effort in China. J&J does not expect any improvement in its business in the Asia Pacific region, specifically in China, in 2025.

Competitive pressure is also hurting sales growth in some MedTech businesses, such as PFA ablation catheters in U.S. electrophysiology. It expects continued impacts from VBP issues in China in 2025 as VBP continues to expand across provinces and products.

Nonetheless, though issues in China are hurting sales, J&J is successfully shifting its MedTech portfolio to high-innovation, high-growth markets, particularly in Cardiovascular. With the recent acquisitions of Shockwave in 2024 and Abiomed in 2022, J&J has become a category leader in four of the largest and highest-growth cardiovascular intervention MedTech markets.

J&J’s Talc Suits and Bankruptcy Attempts

J&J faces more than 62,000 lawsuits for its talc-based products, primarily baby powders. The lawsuits allege that its talc products contain asbestos, which caused many women to develop ovarian cancer. J&J insists that its talc-based products are safe and do not cause cancer. The company permanently discontinued the sales of its talc-based Johnson’s Baby Powder.

J&J failed twice in its attempts to seek bankruptcy to fully resolve these thousands of lawsuits related to its talc products.

However, in 2024, J&J made strong progress toward resolving the talc litigation. In May 2024, the company proposed a new plan, committing to pay claimants approximately $6.5 billion nominally over 25 years, which could resolve 99.75% of all pending talc lawsuits against it.

In September, J&J, via another subsidiary called Red River Talc, filed for voluntary bankruptcy in Texas for the third time, having received the support of approximately 83% of current claimants for the proposed bankruptcy plan. Red River also increased its settlement commitment by $1.75 billion to approximately $8 billion. The talc bankruptcy confirmation hearing began in February 2025 in Texas.

J&J Stock Price, Valuation and Estimates

J&J’s shares have outperformed the industry year to date. The stock has risen 13.1% in the year-to-date period compared with 6.3% growth of the industry. The stock has also outperformed the sector and S&P 500 Index as seen in the chart below. It is also trading above its 200-day and 50-day moving averages.

JNJ Stock Outperforms Industry, Sector & S&P 500

Image Source: Zacks Investment Research

From a valuation standpoint, J&J is not very cheap. Going by the price/earnings ratio, the company’s shares currently trade at 15.30 forward earnings, slightly lower than 16.69 for the industry. The stock is also trading slightly below its five-year mean of 15.94.

JNJ Stock Valuation

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for 2025 earnings has risen from $10.48 per share to $10.58 over the past 30 days, while that for 2026 has declined from $11.11 to $11.07 over the same timeframe.

JNJ Estimate Movement

Image Source: Zacks Investment Research

Stay Invested in J&J Stock

J&J’s Innovative Medicines segment is showing a growth trend. The company has an interesting R&D pipeline that can generate innovative products and further drive its growth. J&J has been on an acquisition spree lately. It completed the acquisitions of Shockwave and V-Wave in MedTech, as well as Ambrx, Proteologix, and the NM26 bispecific antibody in Innovative Medicine in 2024, which strengthened its pipeline. Continuing the M&A momentum, in January, J&J announced a definitive agreement to acquire Intra-Cellular Therapies ITCI for approximately $14.6 billion, strengthening its presence in the neurological and psychiatric drug market.

However, the softness in the MedTech unit, the Stelara patent cliff and the potential impact of Part D redesign will be significant headwinds in 2025. It remains to be seen how the company navigates them in 2025.

Those who already own this Zacks Rank #3 (Hold) company’s shares may stay invested for some time as the visibility for a resolution of the talc lawsuits has improved, and J&J looks optimistic about a better performance in 2025.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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