Dow component Johnson & Johnson (JNJ) is trading at an all-time high in Tuesday's pre-market session 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.
- Johnson & Johnson is trading higher after beating fourth quarter estimates and raising 2021 guidance.
- Medical devices sales are growing at a healthy pace.
- The company will release eagerly anticipated Phase 3 vaccine data next week.
- Price structure forecasts continued upside into the $190s.
The medical devices division posted the strongest quarterly results, growing 10.5% year over year, followed by an 8.4% increase in pharmaceutical division sales. The consumer health division brought up the rear, growing just 3.1%, driven by sales of over-the-counter products that include Tylenol, Pepcid, and Listerine. CFO Joe Wolk singled out medical devices as a major 2021 growth driver during a post-release interview.
The executive offered optimistic comments on J&J's COVID-19 vaccine, stating that Phase 3 results will be released early next week. He believes the data set will be a "robust" study, matching expectations that it will rival efficacy offered by the Moderna, Inc. (MRNA) and Pfizer Inc. (PFE) vaccines. That's a big deal because the Johnson & Johnson vaccine requires just one dose and can be stored at room temperature, offering a potential solution to the unbearably slow inoculation rollout.
Wall Street consensus on Johnson & Johnson hasn't changed in the past quarter, maintaining an "Overweight" rating based upon nine "Buy" and four "Hold" recommendations. One analyst dropped J&J to "Underweight," possibly triggered by the company's baby powder exposure. Price targets currently range from a low of $139 to a Street-high $181, while the stock will open Tuesday's session about $3 below the median $172 target. A vaccine rollout may not affect these ratings due to the company's massive product pipeline.
Johnson & Johnson Monthly Chart (2000 – 2021)
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. It is characterized by increasing price volatility and diagrammed as two diverging trendlines, one rising and one falling. It usually occurs after a significant rise, or fall, in the action of security prices. It is identified on a chart by a series of higher pivot highs and lower pivot lows.
The Bottom Line
Johnson & Johnson stock has rallied to an all-time high in reaction to strong quarterly results and the upcoming release of Phase 3 vaccine data.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.