Johnson & Johnson, Shaking Off Its Stodgy Image, Is One of Our Stock Picks for 2022

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This article is an excerpt from Barron’s 10 favorite stocks for 2022, published on Dec. 17. To see the full list, click here.

Johnson & Johnson is shaking off its stodgy image as it moves to develop a broad and underappreciated drug portfolio and spin off its consumer business.

The stock, now priced around $173, trades for a reasonable 17 times projected 2022 earnings of $10.38 a share and has a secure 2.5% dividend yield.

The world’s largest healthcare company recently spent a day highlighting opportunities among its existing drugs and its pipeline. These include Darzalex for multiple myeloma, Tremfya for psoriasis, and Rybrevant for lung cancer.

Johnson & Johnson (ticker: JNJ) aims to expand its pharmaceutical sales by 5% annually, to $60 billion, by 2025 and have 13 drugs with annual sales of $1 billion or more.

Some analysts came away impressed. Citi Research’s Joanne Wuensch lauded the “breadth and depth” of the drug portfolio. She has a Buy rating and $192 price target. J&J is also a big producer of medical devices.

The spinoff of the consumer products business, which includes Tylenol, Listerine, and Band-Aids, may not add a lot of value, however. And the company’s potential legal liability for talc and opioids remains a risk.

Some investors would like to see Johnson & Johnson ramp up a small buyback program, given its earnings power and conservative balance sheet. J&J boasts one of only two triple-A credit ratings among U.S. corporations. Microsoft (MSFT) has the other.

Barron’s Stock Picks for 2022

We have identified these 10 as among the best candidates to outperform the market next year.

Company / Ticker Recent Price YTD Change 2021E EPS 2022E EPS 2022E P/E Dividend Yield Market Value (bil)
Amazon.com / AMZN $3,377.42 4% $41.11 $51.37 65.7 None $1,713
AT&T / T 23.71 -18 3.38 3.17 7.5 8.8% 169
Berkshire Hathaway / BRK.A 454,550.00 31 17,466.30 18,928.50 24.0 None 673
General Motors / GM 58.39 40 6.73 6.93 8.4 None 85
Hertz Global Holdings / HTZ 21.01 -22* 4.02 2.55 8.2 None 10
IBM / IBM 125.93 5 10.05 11.04 11.4 5.2 113
Johnson & Johnson / JNJ 173.01 10 9.83 10.38 16.7 2.5 455
Nordstrom / JWN** 20.05 -36 1.27 1.99 10.1 None 3
Royal Dutch Shell / RDS.B 42.82 27 4.86 6.19 6.9 3.9 166
Visa / V*** 214.37 -2 5.91A 7.04 30.5 0.7 467

*Since July 1. **Estimates for Jan. 2022 and Jan. 2023 fiscal year ends. ***Sept. fiscal year end. E=estimate. A=actual.

Source: FactSet

Write to Andrew Bary at andrew.bary@barrons.com