Johnson & Johnson leads the Dow higher after JPMorgan upgrades stock
Johnson & Johnson (NYSE: JNJ) contributed the most to gains for the Dow Jones industrial average (Dow Jones Global Indexes: .DJI) on Monday after analysts at JPMorgan upgraded the stock on expectations of stronger growth in its pharmaceuticals division.
JPMorgan upgraded Johnson & Johnson's stock to overweight from neutral and hiked its price target to $140 from $133, representing a 13.2 percent potential upside from Friday's close of $123.64.
Analyst Michael Weinstein said he expects organic sales growth in the firm's pharma division to "re-accelerate" from 2 percent in the first half of this year to a range of 5-6 percent in the second half of 2017. He added that JPMorgan sees organic growth to range between 6 and 7 percent in 2018.
"This should put J&J's pharma growth in 2018 at 2x its pharma peers (3.2%) and enable J&J's overall top-line to accelerate from 1.5-2.0% organic in 1H17 [first-half 2017] to 4.0-4.5% in 2H17 and 4.5-5.0% in 2018," Weinstein said in a note Monday.
"We recognize that this is a notably contrarian call today. J&J is coming off a disappointing first quarter, and the second quarter is going to be just as challenging, owing to $340M in 2Q16 gross-to-net adjustments that make for a particularly tough comp," Weinstein added.
Johnson & Johnson reported mixed first-quarter results on April 19, as earnings per share topped analyst expectations while revenue missed.
"But, ... once J&J gets the second quarter behind it, comps ease considerably, new products should get approved, and clinical trial read-outs become potential catalysts for an improving Pharma business and a reacceleration in top-line growth."
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