Johnson & Johnson Stock Dips Ahead of Earnings Amid Patent Cliff Concerns

Johnson & Johnson (JNJ) saw its stock drop nearly 6% over four days leading up to its October 13 earnings release. The decline began on September 29, following a price target adjustment by BofA to $278, which also warned of a potential third-quarter earnings per share (EPS) miss. Despite this, shares remain up 23.7% for the year. The company’s CFO, Joseph Wolk, has argued that a significant patent cliff in 2027, worth about $4 billion, will not slow reported growth.

Wolk highlighted the upcoming loss of exclusivity for key products like XARELTO, the pulmonary arterial hypertension franchise, and SIMPONI and STELARA, totaling around $4.5 billion. He maintained that 2027 should still deliver equivalent reported growth, supported by strong performance from ICOTYDE, an oral psoriasis drug with promising early market traction and clinical trial results. However, the Abiomed unit remains a soft spot due to field actions and utilization studies.

Third-quarter EPS is expected to look weaker due to dilution from recent acquisitions, with a normalized EPS forecast of about $2.48, down roughly 11% from the previous year. Revenue, however, is projected to be around $25.3 billion, with JNJ having beaten sales estimates in the last five quarters. The stock’s P/E ratio of about 23 is higher than Merck’s but lower than Eli Lilly’s.

Analysts’ growth forecasts and price targets suggest a mid-case scenario with a potential total return of around 30%. The main risk is a weaker 2027 outlook, which could lower the stock’s multiple despite earnings growth. Upside potential comes from ICOTYDE outperforming analyst estimates, as Wolk anticipates.