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J&J (JNJ) Announces $5B Stock Repurchase Program, Stock Up

Johnson & Johnson JNJ announced that its board of directors has authorized a new share buyback plan worth $5 billion. The company also reaffirmed its full-year sales and profit targets.

J&J’s stock was up 2% on Wednesday in response to the buyback plan. This year so far, J&J’s shares have declined 3.8% compared with the industry’s decline of 4.1%.

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J&J’s cash flow is strong and its debt levels are manageable, enabling it to return some money to shareholders in the form of share repurchases while growing dividends and investing in innovation at the same time.

As of Jul 22, J&J’s share count was 2.63 billion shares. The buyback program has no time limit and may be suspended or discontinued at any time.

Along with the buyback announcement, J&J maintained its previously issued financial guidance for 2022. J&J expects to generate revenues in the range of $93.3 billion to $94.3 billion. This guidance excludes any revenues from J&J’s COVID-19 vaccine. Revenue growth is expected in the range of 2.1% – 3.1%. Excluding the COVID-19 vaccine, operational constant-currency sales are expected to increase in the range of 6.5%-7.5%.

Adjusted earnings per share are expected to be in the range of $10.15-$10.35. The earnings range indicates an increase of 2.1%-3.1%. On an operational, constant-currency basis, adjusted earnings per share are expected to increase 8.7% – 9.7%.

J&J has been consistently returning value to shareholders through share buybacks and dividend payments, which have been hiked for 60 consecutive years.

In July, the board announced a 6.6% increase in the quarterly dividend, from $1.06 per share to $1.13 per share. This adds up to an annual dividend of $4.52 per share compared with the previous rate of $4.24 per share.

Zacks Rank and Stocks to Consider

J&J currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Morphic MORF, Sesen Bio SESN and Agenus AGEN, all carrying a Zacks Rank #1 (Strong Buy) at present.

In the past 60 days, estimates for Morphic’s 2022 loss per share have narrowed from $3.47 to $1.75. Loss estimates for 2023 have narrowed from $3.96 to $3.62 during the same period. Shares of Morphic have lost 38.9% in the year-to-date period.

Earnings of Morphic beat estimates in three of the last four quarters and missed the mark just once. It came up with an earnings surprise of 48.29%, on average.

Estimates for Sesen Bio for 2023 have narrowed from a loss of 27 cents per share to a loss of 1 cent per share over the past 60 days. Shares of Sesen Bio have declined 21.1% this year so far.

Earnings of Sesen Bio beat estimates in all the last four quarters, delivering a four-quarter surprise of 89.49%, on average.

Estimates for Agenus’ 2022 bottom line have narrowed from a loss of 89 cents to 70 cents in the past 60 days. Loss estimates for 2023 have narrowed from 64 cents per share to 60 cents per share over the same time frame. Agenus’ stock is down 24.2% in the year-to-date period.

Earnings of Agenus beat estimates in three of the last four quarters while missing in one. The stock delivered a four-quarter average negative surprise of 12.02%.

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