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Johnson & Johnson JNJ delivered strong third-quarter 2025 results, with both the top and bottom lines exceeding expectations. Total revenues rose 6.8% to $24 billion, while adjusted EPS of $2.77 per share rose around 16% year over year.
Despite the loss of exclusivity (“LOE”) of its multi-billion-dollar product, Stelara, sales in J&J’s Innovative Medicines unit rose 6.8% year over year, with key drugs Darzalex, Erleada and Tremfya driving growth. New drugs like Carvykti, Tecvayli, Talvey, Rybrevant and Spravato contributed significantly to growth. Its MedTech segment also showed improved adjusted operational growth across several key businesses like Cardiovascular and Surgery. Sales in the MedTech segment rose 6.8% in the third quarter.
J&J also raised its sales guidance for the year to reflect a strong operational performance. The sales guidance was raised from a range of $93.2 billion-$93.6 billion to $93.5 billion-$93.9 billion. The sales projection indicates growth in the range of 5.4%-5.9% versus the prior expectation of 5.1%-5.6%. The adjusted earnings per share guidance was maintained in the range of $10.80-$10.90. J&J did not raise the earnings range, as a better operational outlook is expected to be offset by a higher annual effective tax rate and fourth-quarter manufacturing investments
However, a single quarter’s results are not so important for long-term investors, and the focus should rather be on the company’s strong fundamentals. Let’s understand the company’s strengths and weaknesses to better analyze how to play J&J stock in the post-earnings scenario.
J&J’s Innovative Medicine unit is showing a growth trend. The segment’s sales rose 3.4% in the first nine months of 2025 on an organic basis despite the LOE of Stelara and the negative impact of the Part D redesign. The third quarter was the segment’s second consecutive quarter of sales of more than $15 billion despite Stelara’s LOE.
In 2026, J&J expects accelerated growth in the Innovative Medicine segment to be driven by its key products, such as Darzalex, Tremfya, Spravato and Erleada, as well as new drugs like Carvykti, Tecvayli and Talvey and recently launched products, including Tremfya in inflammatory bowel disease (IBD), Rybrevant plus Lazcluze in non-small cell lung cancer and the newly approved drug, Inlexzo in bladder cancer.
J&J has rapidly advanced its pipeline this year, attaining significant clinical and regulatory milestones that will help drive growth through the back half of the decade. In September 2025, the FDA approved Inlexzoh/TAR-200 for treating high-risk non-muscle invasive bladder cancer. It is the first-of-its-kind drug-releasing system to provide sustained local delivery of a cancer treatment directly into the bladder.
In April 2025, the FDA approved Imaavy (nipocalimab) for treating generalized myasthenia gravis. J&J believes that nipocalimab has a pipeline-in-a-product potential. Regulatory applications were recently filed for another key candidate, icotrokinra, for moderate-to-severe plaque psoriasis. J&J believes that icotrokinra has the potential to revolutionize the treatment of plaque psoriasis with a once-a-day pill.
Three of J&J’s new cancer drugs are Carvykti, a BCMA CAR-T therapy for relapsed or refractory multiple myeloma, Tecvayli, for relapsed or refractory multiple myeloma, and Talvey, a novel bispecific therapy for heavily pretreated multiple myeloma. These drugs have also begun to contribute to top-line growth. Combined, they generated $2.14 billion in sales in the first nine months of 2025.
J&J’s latest acquisition of Intra-Cellular Therapies added antidepressant drug, Caplyta, to its neuroscience portfolio. Caplyta is already approved for the treatment of schizophrenia and is the only medicine approved for the treatment of depression in both bipolar 1 and 2. With a regulatory application under review, Caplyta is expected to be approved as an adjunctive treatment for major depressive disorder later in 2025.
J&J believes 10 of its new products/pipeline candidates in the Innovative Medicine segment have the potential to deliver peak sales of $5 billion, including Talvey, Tecvayli, Imaavy, Caplyta, Inlexzo, Rybrevant, plus Lazcluze and icotrokinra.
J&J’s MedTech business has improved in the past two quarters, driven by the acquired cardiovascular businesses, Abiomed and Shockwave, as well as Surgical Vision and wound closure in Surgery. Improvements in J&J’s electrophysiology business also drove the growth.
Along with its third-quarter earnings release, J&J announced its intention to separate its Orthopaedics franchise into a standalone orthopedics-focused company. The company is going to be called DePuy Synthes and will be led by Namal Nawana, an industry veteran.
The decision aligns with J&J’s efforts to shift its MedTech portfolio to high-innovation, high-growth markets like cardiovascular and robotic surgery. The separation will allow J&J to focus on its six priority areas of Oncology, Immunology, Neuroscience in the Innovative Medicine segment and Cardiovascular, Surgery and Vision in the MedTech unit. Moreover, the separation will improve its MedTech unit’s growth and margins as the Orthopaedics franchise has been a slow-growth business for J&J.
In 2026, J&J expects better growth in the MedTech business than 2025 levels, driven by increased adoption of newly launched products across all MedTech platforms and increased focus on higher-growth markets. J&J expects to launch new products like Shockwave C2 Aero catheter and Tecnis intraocular lens in the United States, as well as regulatory submission for the OTTAVA robotic surgical system in 2026. These new products may also contribute to growth in 2026.
However, the company continues to face headwinds in China. Sales in China are being hurt by the impact of the volume-based procurement (VBP) program, which is a government-driven cost containment effort in China. J&J expects continued impacts from VBP issues in China as the program continues to expand across provinces and products.
J&J lost U.S. patent exclusivity of Stelara in 2025. Stelara was a key top-line driver for J&J, accounting for around 18% of J&J’s Innovative Medicine unit’s sales in 2024, before it lost patent exclusivity in 2025.
Several biosimilar versions of Stelara have been launched in the United States in 2025. The launch of generics is significantly eroding Stelara’s sales and hurting J&J’s sales and profits in 2025. Stelara sales declined around 40% in the first nine months of 2025. The Stelara LOE hurt revenue growth by 640 basis points in the third quarter.
In addition, sales in 2025 are being hurt by the impact of the Medicare Part D redesign under the Inflation Reduction Act (IRA). Among other measures, the IRA requires the U.S. Department of Health and Human Services (HHS) to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D.
In August 2023, the HHS selected J&J’s drugs, Xarelto, Stelara and Imbruvica as one of the first 10 medicines subject to government-set prices. J&J expects a negative impact of approximately $2 billion in sales due to the Medicare Part D redesign in 2025. The Part D redesign is mainly hurting sales of drugs like Stelara, Tremfya, Erleada and pulmonary hypertension drugs.
J&J faces more than 70,000 lawsuits for its talc-based products, primarily baby powders. The lawsuits allege that its talc products contain asbestos, which caused many women to develop ovarian cancer. J&J insists that its talc-based products are safe and do not cause cancer. The company permanently discontinued the sales of its talc-based Johnson’s Baby Powder.
In April, a bankruptcy court in Texas rejected J&J’s proposed bankruptcy plan to settle its talc lawsuits after a two-week trial in Houston. J&J has gone back to the traditional tort system to fight the lawsuits individually, with its bankruptcy strategy to settle the lawsuits failing for the third time.
J&J’s shares have outperformed the industry year to date. The stock has risen 32.9% in the year-to-date period compared with a 5.6% increase of the industry. The stock has also outperformed the sector and the S&P 500 Index, as seen in the chart below.
From a valuation standpoint, J&J is slightly expensive. Going by the price/earnings ratio, the company’s shares currently trade at 17.05 forward earnings, higher than 15.62 for the industry. The stock is also trading above its five-year mean of 15.64.
The Zacks Consensus Estimate for 2025 earnings has remained unchanged at $10.86 per share, while that for 2026 has risen from $11.36 to $11.44 over the past 60 days.
J&J looks quite optimistic that growth will accelerate in 2026. It believes the consensus estimates for 2026, for both the top and bottom lines, are too low. In 2026, J&J expects top-line growth of more than 5% while the consensus estimate is around 4.6%. EPS growth is expected to be similar to revenue growth. Adjusted earnings per share are expected to be around 5 cents more than the consensus of $11.39 per share. It expects sales growth in both segments to be higher in 2026. J&J also boasts strong cash flows and has consistently increased its dividends for 63 consecutive years.
The Stelara patent cliff and the impact of Part D redesign are significant headwinds in 2025. The uncertainty around the unresolved legal issues and pharma tariffs lingers. However, the company looks quite confident that it will be able to navigate these challenges.
The drug and biotech sector has also recovered in the past month, with large drugmakers like Pfizer PFE and AstraZeneca AZN signing drug pricing agreements with the Trump administration. PFE and AZN have offered to cut prescription drug prices and boost domestic investments in exchange for a three-year exemption from tariffs on pharmaceutical imports.
The deals between PFE and AZN and the Trump administration have raised hopes of a sustainable sector recovery, with the President offering to hold off the tariffs on pharmaceutical imports to sign similar deals with other drugmakers. J&J could well be next in line to sign a similar deal, as it has already committed to boosting manufacturing in the United States. J&J has already announced a plan to invest $55 billion over the next four years to ensure that all medicines consumed in the United States are manufactured domestically.
J&J’s price appreciation this year, rising estimates and consistent earnings and sales growth suggest one should stay invested in this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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