Will J&J's Q2 Results Reflect End of MedTech Issues & Higher Sales?
In the MedTech segment, newly acquired cardiovascular businesses, Abiomed and Shockwave, as well as continued uptake of its new products, are likely to have driven growth in the second quarter. However, sales in J&J's MedTech business continue to face headwinds in the Asia Pacific, particularly in China. Sales in China are being hurt by the impact of the volume-based procurement (VBP) program and the anticorruption campaign. VBP is a government-driven cost-containment effort in China. J&J does not expect any improvement in its business in the Asia Pacific region, specifically in China, in 2025. JNJ expects continued impacts from VBP issues in China in 2025 as the program expands across provinces and products.
Competitive pressure is also expected to continue to hurt growth in some MedTech businesses, such as PFA ablation catheters in U.S. electrophysiology. In the first quarter, MedTech sales were hurt by several one-time events, mainly impacting orthopedics. This one-time impact is not likely to have hurt sales in the second quarter.
Nonetheless, sales are expected to be higher in the second half of 2025 than in the first half as the business moves past tougher first-quarter comps and new products gain momentum throughout 2025. However, tariff-related costs are expected to hurt profits in the MedTech segment
J&J's Key Competitors in the Medical Devices Market
J&J's MedTech unit faces strong competition from several major players in the medical device industry like Medtronic MDT, Abbott, Stryker SYK and Boston Scientific BSX.
While Medtronic has a strong presence in cardiovascular, neuroscience and surgical technologies, Stryker is a global leader in medical technology, specializing in innovative solutions across surgical, neurotechnology, orthopedics and spine care. Boston Scientific markets products for cardiovascular, endoscopy, urology and neuromodulation. Abbott is known for its medical device products across cardiovascular, diagnostics, and diabetes care.
JNJ's Price Performance, Valuation and Estimates
J&J's shares have outperformed the industry year to date. The stock has risen 9.7% in the year-to-date period compared with a 0.6% increase of the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, J&J is reasonably priced. Going by the price/earnings ratio, the company's shares currently trade at 14.43 forward earnings, lower than 14.99 for the industry. The stock is also trading below its five-year mean of 15.73.
The Zacks Consensus Estimate for 2025 earnings has risen from $10.60 per share to $10.62 per share for 2025 and from $10.98 per share to $11.00 per share over the past 30 days.
J&J has a Zacks Rank #2 (Buy) currently. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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