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3 Reasons This HealthCare Stock Is a Great Buy in 2022 | The Motley Fool

The importance of the healthcare industry became more clear amid the pandemic. With the aging population and the world engulfed with numerous other health crises, this is one sector that isn’t losing its relevance any time soon. 

Everyone knows Johnson & Johnson‘s ( JNJ 0.59% ) brands, including Listerine, Neutrogena, Clean & Clear, Benadryl, and Stayfree, and many more that have captured global market share. But the company is much more than that. Even amid the ongoing pandemic, Johnson & Johnson kept growing its revenue and profits, showing how strong its brand name is and the loyal customer base it has created.

Its recent fourth-quarter 2021 results are proof of its excellent financials. Let’s take a look at those numbers and why this stock is a great buy this year.

Image source: Getty Images.

1. It has outstanding financials

For 2021, the company recorded $94 billion in sales, representing 13.6% year-over-year growth, and adjusted net earnings grew 22% to $26 billion. With a portfolio of quality drugs, its pharmaceuticals segment brought in 55% of total revenue last year, up 14% year-over-year. 

Its medical devices segment, which boasts a range of products (from those used for joint reconstruction and trauma to sports medicine and biomaterials), saw a year-over-year increase of 18% to $27 billion in 2021. The segment recovered this year from COVID-19 impacts, which had delayed all non-urgent procedures.

Johnson & Johnson also now plans to fight peer Intuitive Surgical in the robotic-assisted surgery segment. Intuitive has been dominating the space with its state-of-the-art da Vinci robotic system, which is popular worldwide. Johnson & Johnson introduced its robot-assisted surgery system Ottava in November 2021.

The company expects another strong year. In its full-year 2022 guidance, J&J stated that, including sales from its COVID-19 vaccine, it expects adjusted operational sales to grow in the range of 7% to 8.5% and adjusted operating earnings per share to grow in the range of 8.2% to 10.2% to land between $10.60 and $10.80 per share.

Wall Street analysts also see an upside of 14% for Johnson & Johnson’s stock in the next 12 months.

2. Its diversified business is its strength

Healthcare juggernaut Johnson & Johnson’s competitive edge is its diversified business. It operates three segments — consumer health, pharmaceuticals, and medical devices. Recently, it announced that it would separate its consumer segment into a new, publicly traded company, but the remaining businesses boast plenty of potential.

Some of its popular drugs from its pharmaceutical segment showed a strong results last year. That includes immunology drug Stelara, which saw sales jump 18.5% year over year to $9.1 billion. And Tremfya, a treatment for adults with moderate to severe plaque psoriasis, saw an impressive 58% year-over-year rise to over $2.1 billion in revenue for the year.

Cancer drugs Darzalex and Erleada also added a combined $7.2 billion to total revenue in the year. Darzalex, used to treat multiple myeloma, saw its U.S. sales jump 42% year-over-year. U.S. sales of Erleada, which is used to treat prostate cancer, rose by 39% from 2020 levels. The company’s neuro drug Invega Sustenna, used for the treatment of schizophrenia in adults, brought in another $4 billion in revenue for the year.

The company also generated $2.3 billion in sales from its COVID-19 vaccine, Ad26.COV2.S, used for the treatment of the SARS-CoV-2 virus.

3. It is a dividend king

Johnson & Johnson is not only a growth story. The company is also a Dividend King, paying dividends for the last 59 years and proving the company has a stable business. Increasing  earnings have allowed it to pay and hike dividends even in difficult markets. Currently, its dividend yield is 2.59%, better than the S&P 500‘s 1.3% yield. The company recently announced its quarterly dividend payment of $1.06 for Q1 2022, payable on March 8.

J&J’s continued effort to develop innovative products is what leads me to believe in its growth prospects. It is a smart healthcare pick for risk-averse investors who want some stability with their investments while earning consistent dividends over the long term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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