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As Johnson & Johnson (JNJ) stock prices rise, is the company can be still viewed as a good option for investors despite the legal issues?
Johnson & Johnson (NYSE: JNJ) stock prices fell during yesterday’s trading session. Sources say that the company is still in form. The company has become a fixture in many households and hospitals for over a century. The company is close to the next earnings report. Many are wondering if the stock is still the staple that it has been for the past century and a half. The reason for this is the recent increase in lawsuits has been a cause for concern. Yesterday Johnson & Johnson (JNJ) stock price was at $146.97 (+1.44%). However, in the pre-market it lost 0.65%, now the price is $146.01.
The big question is if Johnson & Johnson will be able to manage the various litigations. The lawsuits haven’t gone out of control for now. This could change in the future.
Johnson & Johnson (JNJ) Stock Price Up Despite Rising Legal Issues
JNJ’s profit for the past two years plus has been above $20 billion. Its profit margin has fallen below 14% only during two of those quarters. The healthcare company has been churning out profits. This is despite the increasing pressures coming from the lawsuits.
Baby products, the vaginal implants, and its Risperdal drug have been major causes of JNJ’s recent legal woes. Even though they have been heavy-hitting, the lawsuits haven’t affected JNJ’s bottom line.
The numbers show that the pressure is declining though. The first-quarter results released on April 14th show that JNJ has accrued legal costs of about $0.1 billion. This is down from $0.4 billion a year earlier.
JNJ had legal costs of $5.1 billion in 2019. It is about 6.1 % of the company’s $82.1 billion revenue that year. Opioid litigation cost $4 billion. This formed the bulk of the company’s legal issues. The legal costs were 2.5% of revenue at $2 billion in 2018. The issue here is that these legal costs if they rise high enough could be a drag on the company’s finances.
There is a gray cloud on the horizon for Johnson & Johnson. Washington States’ announcement in January on suing JNJ presents a lot of risk for the company.
JNJ Stock Looks Good
It doesn’t mean that the company isn’t a high flier. Johnson & Johnson (JNJ) stock prices have been up by 45% in the past five years. The S&P 500 has been up by about 40%. The company increased its dividends by 6.3%. This has been consistent for 58 years.
The company has also been consistent in paying its judgment payouts. The $8 billion Risperdal judgment was finally dropped to $6.8 million. If the opioid legal issues continue, they could become the albatross that could cause a few headaches for JNJ.
As per the books, investors are hoping for a stronger performance as the earnings performance will be assessed soon.
Pundits’ forecasts call for $7.68 per share and revenue of $79.48 billion. These are year-on-year differences of -11.52% and -3.14%. These changes could be attributed to the effects of the COVID-19 pandemic.
Whatever happens, we are going to see Johnson & Johnson emerge as one of the leading companies this year and beyond. Legal issues or not, some companies are institutional. JNJ is one of them.