Johnson & Johnson stock hasn’t yet caught the eyes of Reddit day traders. But theThe company said Tuesday that it expects to book between $88.8 billion and $90 billion in 2021 sales, after adjusting for acquisitions, divestitures and foreign-exchange effects. That is good for a growth rate of about 8% from last year. Johnson & Johnson also expects adjusted earnings of about $9.50 a share, which would be nearly 20% growth. Shares rallied in morning trading.
A gradual return to normal in the medical-devices business segment is a big part of that formula: The onset of Covid-19 and resulting disruptions to elective surgical procedures led to a 10.5% sales decline in 2020 from a year earlier. That improved to just a 1.5% decline in the fourth quarter, however. There should be further upside ahead, as sales in some device categories like vision and orthopedics have been slower to recover.
Shares are trading at about 18 times this year’s adjusted profit forecast, a fairly sober valuation in a wild market. The company’s guidance leaves other sources of potential upside. It certainly has the firepower to make a large pharmaceutical or medical-device acquisition should it choose to do so: Johnson & Johnson ended the year with $10 billion in net debt on its books, or half the free cash flow generated in 2020.
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