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Johnson & Johnson is a buy after the company’s consumer business spinoff earlier this year, according to RBC Capital Markets. The firm initiated Johnson & Johnson with an outperform rating and $178 price target, which suggests shares can climb about 14.5% from Wednesday’s close. The company spun off its consumer health business Kenvue earlier this year. This separation has “unlocked potential” for Johnson & Johnson going forward, analyst Shagun Singh said. “JNJ’s value-accretive consumer separation: (1) positions it uniquely as the only global healthcare company with Pharma and MedTech under a single portfolio, allowing for exclusive focus on innovation and enhanced productivity; (2) positions it for higher revenue and margins; and (3) leaves room to monetize its retained 9.5% stake in the consumer asset,” he added. Singh also said the company’s pharma franchise is poised to deliver competitive growth and that its medtech division is on pace to achieve “top-tier growth and profitability.” Its pharmaceutical sales are aided by its pipeline that includes five therapies worth more than $5 billion in revenue potential and twelve therapies with more than $1 billion potential. The medtech division — which provides devices for surgeries, orthopedics and vision — had jumped in the second quarter as demand rebounded for nonurgent surgeries among older adults after the Covid pandemic. This division has a “clear winning strategy” in gaining sales from growing markets and focusing on innovative products in areas such as surgical and orthopedic robotics and heart failure. The analyst added that Johnson & Johnson is trading below its historical multiples despite its improved financial profile since its Kenvue spinoff and that the company has potential upside from further M & A activity. — CNBC’s Michael Bloom contributed to this report.
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