Should J&J Stock Be in Your Portfolio Ahead of Q2 Earnings?

Core Viewpoint - Johnson & Johnson (JNJ) is set to report its second-quarter 2025 results on July 16, with sales and earnings estimates of $22.79 billion and $2.66 per share respectively. The earnings estimates for 2025 and 2026 have seen slight increases over the past month [1][2]. Group 1: Earnings Performance - JNJ has consistently exceeded earnings expectations in the last four quarters, with an average earnings surprise of 5.71%. The most recent quarter showed a surprise of 7.78% [3][4]. - The company has an Earnings ESP of +2.40% and a Zacks Rank 2 (Buy), indicating a strong likelihood of a positive earnings surprise [4]. Group 2: Sales Drivers and Challenges - Sales in JNJ's Innovative Medicines segment are expected to be driven by key products like Darzalex, Tremfya, and Erleada, with projected sales of $3.45 billion, $1.08 billion, and $903.9 million respectively [6][7]. - The sales of Stelara are anticipated to decline due to biosimilar competition, with estimates pegged at $1.88 billion [8][9]. - The MedTech segment faces challenges in China due to a volume-based procurement program, but growth is expected from newly acquired businesses like Abiomed and Shockwave [12][13]. Group 3: Strategic Developments - JNJ's acquisition of Intra-Cellular Therapies for approximately $14.6 billion enhances its presence in the neurological and psychiatric drug market [24]. - The company is navigating significant headwinds, including the impact of the Stelara patent cliff and ongoing legal battles related to talc lawsuits [25][24]. Group 4: Stock Performance and Valuation - JNJ's stock has risen 10.3% this year, outperforming the industry and the S&P 500, with a current price/earnings ratio of 14.42, slightly below the industry average [16][19]. - The company is viewed as reasonably valued, with expectations for operational sales growth to accelerate in the second half of 2025 and beyond [27][19].