Should J&J Stock Be in Your Portfolio Ahead of Q2 Earnings?

Johnson & Johnson (JNJ) is scheduled to report Q2 2025 earnings on July 16, with consensus estimates at $22.79 billion in sales and $2.66 EPS, and a positive Earnings ESP suggesting a likely beat. While the Innovative Medicines segment is expected to see robust growth from key drugs like Darzalex and new product launches, this will be partially offset by significant biosimilar competition for Stelara and competitive pressures on Imbruvica. The MedTech segment faces headwinds from China's volume-based procurement and tariffs, although recent acquisitions like Abiomed and Shockwave are providing support. Despite these challenges and ongoing talc litigation, JNJ's stock has outperformed, and the company anticipates accelerated operational sales growth in the second half of 2025 and beyond, positioning 2025 as a 'catalyst year' for future expansion.

Analysis

Johnson & Johnson (JNJ) is approaching its Q2 2025 earnings report on July 16 with a complex but moderately positive outlook, supported by a Zacks Rank #2 (Buy) and a positive Earnings ESP of +2.40%. The Innovative Medicines segment is experiencing a significant transition, where strong growth from key products like Darzalex (consensus estimate: $3.45 billion) and the rapid uptake of new drugs such as Carvykti and Tecvayli are expected to contend with major headwinds. The most critical challenge is the loss of exclusivity for Stelara, whose biosimilar competition eroded revenue growth by 470 basis points in Q1 and is projected to have a steeper impact in Q2. Concurrently, the MedTech division faces difficult year-over-year comparisons and persistent pressure in China from the volume-based procurement (VBP) program and an estimated $400 million in tariff-related costs. However, this weakness is partially mitigated by the strong performance of recent acquisitions, Abiomed and Shockwave. Despite the ongoing talc litigation overhang, JNJ's stock has outperformed its industry year-to-date with a 10.3% gain and trades at a reasonable 14.42x forward P/E, below its five-year average, as the company positions 2025 as a "catalyst year" with growth expected to accelerate in the second half.

Key Decisions for Investors

• Investors should monitor the Q2 report for the precise magnitude of Stelara's sales decline against its $1.88 billion estimate, as this will be a key determinant of near-term sentiment and the company's ability to meet guidance.
• Pay close attention to the growth rates of both the new drug portfolio (Carvykti, Tecvayli) and the acquired MedTech assets (Abiomed, Shockwave), as these are critical to validating the long-term strategy of offsetting patent cliffs and diversifying growth.
• Given the stock's outperformance, reasonable valuation, and expectation of a second-half growth acceleration, maintaining or initiating positions could be considered, but must be balanced against the unquantified financial risk from the ongoing talc litigation, which remains a significant overhang.