J&J's MedTech Shows Strong Growth in 2025: Will 2026 be Better?

Core Insights - Johnson & Johnson's (JNJ) MedTech segment, which includes products in orthopedics, surgery, cardiovascular, and vision markets, represents approximately 36% of the company's total revenues, achieving nearly $34 billion in sales in 2025 with a 5.4% operational growth supported by 15 major new product launches [1][10] MedTech Segment Performance - J&J is transitioning its MedTech portfolio towards high innovation and high growth markets, particularly in Cardiovascular, with sales in this segment increasing by 15.8% to $8.9 billion in 2025 due to acquisitions of Shockwave and Abiomed [2][10] - The MedTech business has shown improvement over the last three quarters, driven by the acquired cardiovascular businesses and growth in Surgical Vision and wound closure, resulting in a 4.3% organic sales increase in 2025 [3][10] Challenges and Future Outlook - The company faces challenges in China due to the volume-based procurement (VBP) program, which is impacting sales growth in some MedTech areas [4] - For 2026, J&J anticipates better growth in the MedTech business compared to 2025, driven by the adoption of new products across its portfolios, although it expects continued VBP impacts in China and potential tariff costs of around $500 million [5][10] Strategic Developments - J&J is considering separating its Orthopaedics franchise into a standalone company, DePuy Synthes, by mid-2027, which is expected to enhance growth and margins for its MedTech unit in the long term [6] Competitive Landscape - J&J's MedTech unit competes with major players in the medical device industry, including Medtronic, Abbott, Stryker, and Boston Scientific, each specializing in various medical technologies [7][8] Stock Performance and Valuation - J&J's stock has outperformed the industry over the past year, rising 55.9% compared to the industry's 21.3% increase [9] - The company's shares are currently trading at a price/earnings ratio of 20.90, which is higher than the industry average of 18.83 and above its five-year mean of 15.65 [12] Earnings Estimates - The Zacks Consensus Estimate for J&J's 2026 earnings has increased from $11.47 to $11.54, while the estimate for 2027 has risen from $12.25 to $12.40 over the past 30 days [14]