Johnson & Johnson (NYSE:JNJ) saw its stock price drop 6.8% by 12:30 p.m. ET on Tuesday, despite beating adjusted earnings estimates for the third quarter. The company reported adjusted earnings of $2.59 per share, surpassing analysts' expectations of $2.53 per share, and sales of $25.4 billion, slightly above forecasts.
The decline in stock price came despite the earnings beat, as the company's actual GAAP profits fell by a staggering 96% year-over-year. Johnson & Johnson attributed this sharp decline to a one-time special charge related to proposed talc litigation resolution, the acquisition of Firefly Bio, Inc., and a strategic collaboration with Sail Biomedicines. The company's GAAP earnings per share dropped to just $0.09, a significant decrease from previous periods.
Despite the dramatic drop in GAAP earnings, Johnson & Johnson raised its guidance for the rest of 2026. Management now expects sales to grow 7.4% to $101.2 billion, with adjusted earnings projected at $11.10 per share. The company also reported a 6% increase in free cash flow to $15.1 billion.
Some analysts, however, remain skeptical about the stock's valuation. They argue that the company's growth projections may not be sufficient to justify its current stock price, which trades at over 22 times adjusted earnings and nearly 29 times free cash flow.