Johnson and Johnson (NYSE:JNJ) shares are currently trading around $64.50, and the mean 12 month price target from analysts researching the stock is $72.69 (12.7% upside potential). This blue chip stock is trading above its 50-day exponential moving average of $63.80 and its 200-day exponential moving average of $63.74. It has been flirting with these averages for two or three months, though has been unable to remain in positive territory when compared to them for more than a few days. The stock has been range bound between $60 And $66 since mid July, having hit its 52 week high of $68.05 in early July after recovering well from its 52-week low of $57.50 set in mid March.
Earnings per share for the last 12 months are $4.10, and these are expected to reach to $5.27 in its next fiscal year (ending Dec 2012). These numbers place the shares on a trailing price to earnings ratio of 15.74, and a forward multiple of 12.31. Compared to its main competitors, these ratios are more demanding: Novartis (NYSE:NVS) trades on a forward multiple of 9.65, Covidien (COV) at 9.52, and Abbott Labs (NYSE:ABT) at 10.85.
All four companies pay good dividends. JNJ’s dividend of $2.28 is covered 1.79 times by earnings, and yields 3.60%. NVS’s dividend of $2.00 is covered 2.13 times and yields 3.70%; COV paid a dividend last year of $0.90, is covered 4 times by earnings and yields 2%; finally, ABT’s dividend of $1.92 is covered 1.5 times and yields 3.50%. Due to its yield and payout history, JNJ is a Dividend King.
Looking at current operating and profit margins tells a similar picture. JNJ’s operating margin is 25.42%, and profit margin 9.75%. NVS’s operating margin is 22.84%, with a profit margin of 17.10%; COV’s numbers are 22.23% and 16.14%; ABT’s numbers are 20.62% and 11.84% respectively.
JNJ’s last quarterly report showed revenue growth of 6.80% over the same period last year: Again, this is lower than all four of its main competitors (NVS 17.30%, COV 15.30%, ABT 13.20%).
Looking at the 12-month chart, shareholders in JNJ have fared a little better than the broader S&P 500 Index, and when measured against NVS shares have NVS shares has again out-performed. However, the stock is range bound and I see little in the chart pattern that will alter this in the medium term.
Looking at recent news, there is, again, nothing to that excites me about the company:
- Its birth control patch has been endorsed by the US FDA as having benefits that outweigh risks of blood clotting;
- It has recently announced deal between its Janssen Biotech subsidiary and Pharmacylics Inc (NASDAQ:PCYC) that should strengthen its oncology line. Good news, except the cost could end up at $975 million and the deal will impact current year earnings by 4 to 5 cents per share;
And they are, probably, the highlights!
Overall, the trading pattern of JNJ shares, its fundamentals, and news flow point to an unexciting future for shareholders. The shares are likely to remain range-bound and there could be better opportunities for dividend and capital growth elsewhere. NVS, with a better profit margin, larger dividend yield, and a lower forward price to earnings ratio, would get my vote over JNJ at this time. I don’t think the shares are due to see a concerted pullback, nor a large positive move forward. They would suit the investor that wants to buy and put the shares away and not be concerned about seeing the shares down 20%, but for the possibility of better gains look elsewhere.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.