J&J to spin off orthopedics business, sees 2026 sales growth of over 5%

Core Insights - Johnson & Johnson plans to spin off its orthopedics business into a standalone company named DePuy Synthes within the next 18 to 24 months, marking its second major spinoff in two years to focus on higher-growth healthcare segments [1][5] - The company expects total revenue growth to exceed 5% next year, driven by new drug launches and a strengthened medical devices portfolio, raising its 2025 sales forecast to $93.5 billion to $93.9 billion [2][4] - The orthopedics unit generated approximately $9.2 billion last year, accounting for about 10% of total revenue, and will be led by industry veteran Namal Nawana post-spinoff [3][5] Company Strategy - The restructuring plan for the orthopedics business includes exiting certain markets and ceasing the sale of some products, following the recent spinoff of its $15 billion consumer unit into Kenvue [5] - The move aligns with the company's focus on high-growth, high-margin areas such as oncology, immunology, neuroscience, surgery, vision care, and cardiovascular products [6] - The CFO indicated that the company is exploring multiple paths for the separation, primarily focusing on a tax-free spinoff while remaining open to other options [6] Market Performance - Shares of Johnson & Johnson were down 1.2% in early trading but have increased by 32% so far this year, outperforming the broader S&P Healthcare Index, which rose by 3% [3] - Analysts from Guggenheim noted that the recent stock rally could limit further upside potential [4] - J.P. Morgan analysts stated that the orthopedics division represents about 30% of J&J's MedTech segment, with growth below the rest of the portfolio, suggesting that the planned spin-off should create a faster-growing J&J over time [5]