Johnson & Johnson is now two businesses: prescription drugs, led by cancer and immunology, and medical devices. It is growing through the loss of its biggest drug, Stelara, to cheaper copies, and has proposed a $5.5 billion settlement to end its talc lawsuits.
Today’s close against the report’s numbers, updated every weekday. The analysis is as of October 22, 2026; the rating as of October 22, 2026. Both change only when the report is revised.
The cash-flow model’s bear-to-bull range, the probability-weighted value, the price, its 52-week range and the analysts’ average target. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 22, 2026, after its third-quarter results. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds no JNJ shares directly.
Innovative Medicine (about two-thirds of sales) sells cancer drugs such as Darzalex and Carvykti, immunology drugs such as Tremfya, and neuroscience drugs such as Spravato. MedTech sells heart devices, surgical tools, orthopaedics and contact lenses. The consumer business was spun off as Kenvue in 2023.
The challenge is replacing Stelara, its top seller, which lost U.S. patent protection in 2025. New drugs have so far more than made up for it.
Third-quarter sales rose 5.9% to $25.4 billion. Innovative Medicine grew 7.7% even though Stelara’s decline took about 6.9 points off its growth; Tremfya, Darzalex, Carvykti, Rybrevant and Spravato led. MedTech grew 2.5%. Adjusted earnings were $2.59 a share; reported earnings were only $0.09 because of a one-time charge for the proposed talc settlement and two pipeline deals.
Guidance was nudged up to sales of about $101.2 billion and adjusted earnings of $11.05–11.15 a share. The chief executive spoke of returning to double-digit growth by the end of the decade.
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM Sep 2026 | |
|---|---|---|---|---|---|---|
| Revenue | $78.7B | $80.0B | $85.2B | $88.8B | $94.2B | $99.3B |
| Operating margin | 24.6% | 24.5% | 18.6% | 19.6% | 35.6% | 18.8% |
| Net income | $20.9B | $17.9B | $35.2B | $14.1B | $26.8B | $16.1B |
| Operating cash flow | $23.4B | $21.2B | $22.8B | $24.3B | $24.5B | $26.2B |
| Capital spending | $3.7B | $4.0B | $4.5B | $4.4B | $4.8B | $5.6B |
| Free cash flow | $19.8B | $17.2B | $18.2B | $19.8B | $19.7B | $20.6B |
Reported profit swings with one-off items: the Kenvue separation gain in 2023, talc charges and acquired research in other years. Sales and cash flow are much steadier. The quarterly view shows each quarter.
At September 27 J&J had $44.7 billion of debt and $17.2 billion of cash, about $27 billion of net debt; this model also deducts the proposed $5.5 billion talc settlement. It is one of two U.S. companies with a AAA credit rating and has raised its dividend every year for six decades. It buys much of its pipeline: free cash flow of about $15 billion so far this year is shared between dividends and acquisitions.
| Assumption | Base case | Basis |
|---|---|---|
| Sales, 2026 | $101.2B | Guidance midpoint |
| Growth, 2027 and 2028 | 5%, then 6% | Stelara erosion fades; fades to 3% by year 10 |
| Operating margin | 31% rising to 32% | Adjusted margin less amortization (estimate) |
| Reinvestment | $1 for every $2 of new sales | Includes buying pipeline drugs |
| Discount rate | 8.4% | Beta 0.80, this site’s floor (measured 0.33), 6% debt |
| Terminal growth | 3.0% | With a 15% return on new capital |
| Bear | Base | Bull | |
|---|---|---|---|
| Growth, 2027 / 2028 | 2% / 3% | 5% / 6% | 7% / 8% |
| Long-run operating margin | 28% | 32% | 34% |
| Discount rate | 9.4% | 8.4% | 7.4% |
| Value per share | $124 | $194 | $279 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $198. The bear case is Medicare price negotiation and tariffs squeezing drug margins while MedTech stays slow; the bull case is the double-digit growth management describes.
| Discount rate | 7.0% | 7.5% | 8.0% | 8.5% | 9.0% |
|---|---|---|---|---|---|
| Value per share | $265 | $236 | $212 | $192 | $176 |
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To justify the price, you need | Against |
|---|---|
| Sales growth of about 13% a year for two years, then the same fade | 5% and 6% |
| Or a discount rate of about 7.0% | 8.4% |
Investors treat J&J almost like a bond: the price implies a required return of about 7%, close to what its own measured beta of 0.33 would give. On this site’s 0.80 floor the value is lower. Analysts average about $276.
| Risk | Why it matters |
|---|---|
| Stelara and patents | Biosimilars are still eroding Stelara; Darzalex faces its own patent dates later in the decade. |
| Drug pricing | Medicare negotiation and U.S. pricing deals reduce prices on older drugs. |
| Talc | The settlement still needs approval; earlier attempts failed in bankruptcy court. |
| MedTech | Growth of 2–3% lags rivals. |
Upside: Tremfya, Rybrevant and Carvykti growing faster, new launches from acquired pipeline, and a final end to the talc litigation.
J&J is growing through the loss of its biggest drug and has a path to end the talc litigation. The price implies a required return of about 7%, which only works with its very low measured beta; on this site’s floor of 0.80 the value is lower.
What would change the value: Court approval of the talc settlement, 2027 guidance in January and Medicare price negotiations are the next inputs.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $198. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades above our estimated value, which is 28% below the price.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating depends on that assumption: it would be Buy if the index grows 6% a year and Hold at 10%, against 8% here. How ratings work
Against the Street: Analysts average about $276, near the price. The gap with this model is mainly the discount rate: J&J’s measured beta of 0.33 against this site’s floor of 0.80.
| Measure | Johnson & Johnson | Industry median | Rank | |
|---|---|---|---|---|
| Revenue growth, last fiscal year | 6.0% | 0.5% | 2 of 7 | Better than the median |
| Operating margin | 18.8% | 19.6% | 4 of 7 | Worse than the median |
| Price to earnings | 41.2× | 39.4× | 4 of 6 | Worse than the median |
| Free cash flow yield | 3.1% | 7.1% | 6 of 6 | Worse than the median |
Peers: the 6 other S&P 500 companies in Pharmaceuticals with complete data (BMY, LLY, MRK, PFE, VTRS, ZTS). Last twelve months where reported, from SEC filings; prices from the latest close. A lower price-to-earnings ratio ranks higher. These figures update with each data run; the rating does not.
A reliable business at a price that assumes little risk.
| What | Figures | Source |
|---|---|---|
| Latest results | $25.4B (Sales, Q3 2026, +5.9%), +7.7% (Innovative Medicine), +2.5% (MedTech), $2.59 (Adjusted EPS) and others | Q3 2026 results (8-K); Talc settlement |
| The numbers (five-year table) | Five years of annual figures and the last twelve months | SEC XBRL company facts; latest: 10-K for the period to 2025-12-28, 10-Q for the period to 2026-09-27 |
| Price at writing | $267.68 (Close, Oct 22, 2026) | Yahoo Finance; the time of the quote is stated beside the price |
| Discount rate inputs | 10-year Treasury 5.15%, equity risk premium 4.5% | Fixed for every report so they can be compared; How ratings work |
| Valuation | Every value, case and sensitivity | This site’s model: XLSX, CSV |
| Checked by hand | 9 figures on October 23, 2026 | All match. Audit log |
| Input | Bear (10th percentile) | Base (median) | Bull (90th percentile) |
|---|---|---|---|
| Growth, first forecast year | 2.0% | 5.0% | 7.0% |
| Growth, second forecast year | 3.0% | 6.0% | 8.0% |
| Operating margin, near term | 28.0% | 31.0% | 32.0% |
| Operating margin, long run | 28.0% | 32.0% | 34.0% |
| Discount rate | 9.4% | 8.4% | 7.4% |
| Simulation result | |
|---|---|
| Expected value (average of 4,000 runs) | $193.13 |
| Likely range, 10th to 90th percentile | $143.24 to $245.85 |
| Median | $189.82 |
| Chance the value is above the price | 5% |
| Chance it is cheaper than the S&P 500 | 59% |
Each input is drawn from a split normal: its bear and bull values are the 10th and 90th percentiles, so the two sides can differ. Business inputs share a common factor (correlation 0.6); the discount rate moves on its own. Inputs not listed are held at their base value. How the simulation works.