Johnson & Johnson (JNJ) Surges to All-Time High

Johnson & Johnson (JNJ) is probably one of the biggest and best-known names in the health and wellness industry. The company, which was founded in 1886, is based in New Brunswick, New Jersey, and employs more than 130,000 people in 60 different countries. The company was among the first to produce sterile surgical supplies on a mass scale before moving into pharmaceuticals and consumer health products.

The company is also among a handful of others that released a vaccine in 2020 against the COVID-19 virus, which promises to bode well. This article looks at the Dow component's financial results for the fourth quarter of 2020 and how the market reacted.

Key Takeaways

  • Johnson & Johnson is trading higher after beating fourth quarter estimates and raising 2021 guidance.
  • Sales dropped in the medical devices division but increased in both pharmaceuticals and the consumer health division in Q4-2020.
  • The company produced single-dose COVID-19 vaccines.
  • Price structure forecasts continued upside into the $190s.

JNJ's Fourth Quarter Results

Johnson & Johnson traded at an all-time high after beating fourth quarter 2020 top- and bottom-line estimates and raising 2021 earnings per share (EPS) guidance above consensus. The health care giant posted a profit of $1.86 per share, $0.03 better than estimates, while revenue rose 8.7% year over year to $22.5 billion, nearly $1 billion higher than expectations.

Sales in the company's pharmaceutical division grew by 8.4% while the consumer health division grew in the fourth quarter of 2020 by just 3.1%. This was driven by sales of over-the-counter products, such as Tylenol, Pepcid, and Listerine. Johnson & Johnson's medical devices unit, though, posted a 10.5% decline because of the global COVID-19 pandemic and delays in medical procedures.

J&J's chief financial officer (CFO) Joe Wolk offered optimistic comments on the company's COVID-19 vaccine. At the time the financial results were released, Wolk said he expected it would rival the efficacy of those offered by Moderna (MRNA) and Pfizer (PFE). The company received authorization for emergency use for its single-dose vaccine by the U.S. Food and Drug Administration (FDA) in February 2021, which the Centers for Disease Control and Prevention said was 66.3% effective in clinical trials.

Wall Street consensus on Johnson & Johnson didn't change following the results, as the company maintained an overweight rating based on nine buy and four hold recommendations. One analyst dropped J&J to underweight, possibly triggered by the company's baby powder exposure. Price targets in the first quarter of 2021 ranged from a low of $139 to a Street-high $181.

While the company has a single-dose vaccine that was authorized for emergency use by the FDA for the coronavirus, J&J is conducting Phase 3 clinical trials for a two-dose vaccine regimen.

Johnson & Johnson Monthly Chart (2000–2021)

Chart showing the share price performance of Johnson & Johnson (JNJ)

A multi-year uptrend topped out near $70 in 2005, marking resistance that wasn't breached until a 2013 breakout attracted healthy buying interest. The uptick topped out at $110 in 2014 and resumed in 2016, topping out once again in the first quarter of 2018 when President Trump fired the first shot in the trade war with China. Breakout attempts failed in the fourth quarter of 2018 and second quarter of 2019, while a buying impulse into February 2020 reached the mid-$150s.

The stock failed that breakout during the pandemic decline into March, posting a higher low in the $130s and easing into a V-shaped recovery that completed a round trip into the prior high in April. Price action finally completed a breakout to new highs at the end of 2020, setting the stage for strong 2021 returns. The stock is currently trading near $170, with broad price structure forecasting a measured move target in the $190s.

Strong price action into January 2021 also busted through the top of a three-year broadening formation, also known as a megaphone pattern. This is extremely bullish, taking a potentially bearish pattern off the table while setting up a low-risk buying opportunity near $160. The breakout suggests that the market has discounted liability from the baby powder controversy, despite more than 20,000 active cases and numerous appeals.

A broadening formation is a price chart pattern identified by technical analysts, which is characterized by increasing price volatility and visualized as two diverging trend lines—one rising and one falling. It usually occurs after a significant rise or fall in the action of security prices.

The Bottom Line

Established in 1886, New Jersey-based Johnson & Johnson is one of the most recognizable names in the world of pharmaceuticals, medical devices, and consumer health products. Consumers can find some of its most well-known brand names anywhere across the world, including Tylenol, Band-Aid, and Listerine. The company did see declines in the fourth quarter of 2020 because of the global COVID-19 pandemic, but it remains hopeful that its vaccine and the ease of restrictions will help it continue to grow moving forward.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

Article Sources
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  2. Johnson & Johnson. "What We Do."

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  6. Bloomberg. "J&J Vaccine Provides Strong Shield Against Severe Covid."

  7. Johnson & Johnson. "Johnson & Johnson COVID-19 Vaccine Authorized by U.S. FDA For Emergency Use - First Single-Shot Vaccine in Fight Against Global Pandemic."

  8. Centers for Disease Control and Prevention. "Information About Johnson & Johnson’s Janssen COVID-19 Vaccine."

  9. Johnson & Johnson. "Johnson & Johnson Announces Its First Phase 3 COVID-19 Vaccine Trial ENSEMBLE is Fully Enrolled."

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