Newsletter Subscription

A Laser Focus World newsletter subscription is free to qualified professionals:

The Daily Beam

Showcases the newest content from Laser Focus World, including photonics- and optics-based applications, components, research, and trends. (Daily)

Product Watch

The latest in products within the photonics industry. (9x per year)

Bio & Life Sciences Product Watch

The latest in products within the biophotonics industry. (4x per year)

Laser Processing Product Watch

The latest in products within the laser processing industry. (3x per year)

Johnson & Johnson (JNJ): Buy, Sell, or Hold Post Q1 Earnings?

By: StockStory

April 22, 2025 at 05:03 AM EDT

JNJ Cover Image

Johnson & Johnson has been treading water for the past six months, recording a small loss of 3.8% while holding steady at $157.30. However, the stock is beating the S&P 500’s 11% decline during that period.

Is there a buying opportunity in Johnson & Johnson, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Even with the strong relative performance, we're cautious about Johnson & Johnson. Here are three reasons why you should be careful with JNJ and a stock we'd rather own.

Why Is Johnson & Johnson Not Exciting?

Founded in 1886 and known for its iconic red cross logo, Johnson & Johnson (NYSE: JNJ) is a global healthcare company that develops and sells pharmaceuticals, medical devices, and technologies focused on human health and well-being.

1. Declining Constant Currency Revenue, Demand Takes a Hit

Investors interested in Branded Pharmaceuticals companies should track constant currency revenue in addition to reported revenue. This metric excludes currency movements, which are outside of Johnson & Johnson’s control and are not indicative of underlying demand.

Over the last two years, Johnson & Johnson’s constant currency revenue averaged 1.4% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Johnson & Johnson might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

2. Shrinking Adjusted Operating Margin

Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.

Looking at the trend in its profitability, Johnson & Johnson’s adjusted operating margin decreased by 20.1 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its adjusted operating margin for the trailing 12 months was 29.8%.

Johnson & Johnson Trailing 12-Month Operating Margin (Non-GAAP)

3. EPS Trending Down

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for Johnson & Johnson, its EPS declined by 2.8% annually over the last five years while its revenue grew by 5.4%. This tells us the company became less profitable on a per-share basis as it expanded.

Johnson & Johnson Trailing 12-Month EPS (Non-GAAP)

Final Judgment

Johnson & Johnson isn’t a terrible business, but it isn’t one of our picks. Following its recent outperformance in a weaker market environment, the stock trades at 15× forward price-to-earnings (or $157.30 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of Johnson & Johnson

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.

About Us

Laser Focus World Membership

Magazine Subscription

Newsletter Subscription

The Daily Beam

Product Watch

Bio & Life Sciences Product Watch

Laser Processing Product Watch

Get Published!

Photonics Hot List

Following the Photons: A Photonics Podcast

Social Media

Meet the Laser Focus World Team

Editorial

Sales

Editorial Advisory Board