Johnson & Johnson (JNJ) has significantly outperformed Pfizer (PFE) this year, gaining nearly 45% compared to Pfizer’s 6% decline. This stark contrast highlights Johnson & Johnson’s stronger strategic execution and growth prospects over its rival.
Johnson & Johnson’s rally is fueled by multiple factors. The company reported robust Q3 earnings, beating sales and profit estimates, and raised its full-year guidance. Strategic acquisitions such as Halda Therapeutics, targeting prostate cancer, and Intra-Cellular Therapies, focusing on neurology, bolster its high-growth portfolio. Additionally, JNJ’s plan to spin off its orthopedics business aims to sharpen focus on faster-growing sectors like cardiovascular and surgical technologies. This reorientation is reflected in consistent segment growth, with Innovative Medicines fueled by drugs like Darzalex and Tremfya, and the MedTech segment strengthened by Abiomed and Shockwave acquisitions.
On the other side, Pfizer faces significant challenges. The declining demand for its COVID-19 vaccines and treatments Comirnaty and Paxlovid has created a revenue shortfall. Investor worries about Pfizer’s growth outlook have intensified amid patent cliffs, regulatory complexities, and the recent failure of a weight-loss drug candidate. Pfizer’s revenue trends highlight these issues, with quarterly revenue declining by 5.9%, while Johnson & Johnson reported a 6.8% increase.
Comparing margin and profitability metrics, Johnson & Johnson holds an advantage. Its last twelve months (LTM) margin sits at 26.2%, with a three-year average margin of 26.4%. Pfizer’s margins lag behind, underscoring JNJ’s operational efficiency. Additionally, JNJ stock trades at relatively lower valuation multiples despite its superior growth and margin metrics, offering a compelling value proposition.
For investors weighing these two stocks, Johnson & Johnson’s stronger revenue trends, higher profitability, and clearer strategic roadmap make it a favorable pick. However, diversification remains important. Consider blending individual stocks into a well-managed portfolio such as the Trefis Reinforced Value Portfolio, which aims to balance upside with risk mitigation for long-term investors. This approach can help capture gains from leaders like JNJ while smoothing volatility inherent to the pharmaceutical sector.
Read more at: www.trefis.com
