Will J&J's Q2 Results Reflect End of MedTech Issues & Higher Sales?

Johnson & Johnson's MedTech segment, comprising 36% of total revenues, anticipates Q2 growth driven by recent acquisitions like Abiomed and Shockwave, and new product momentum. However, the segment faces persistent headwinds, notably from China's volume-based procurement (VBP) program and anticorruption efforts, which are expected to continue impacting sales into 2025, alongside competitive pressures and tariff-related profit erosion. Despite these challenges, sales are projected to strengthen in H2 2025, with JNJ shares outperforming the industry year-to-date and maintaining a reasonable valuation.

Analysis

Johnson & Johnson's MedTech segment, which constitutes approximately 36% of total revenue, faces a mixed outlook. Growth in the upcoming quarter is expected to be propelled by the integration of recent cardiovascular acquisitions, Abiomed and Shockwave, alongside momentum from new product launches. This follows a first quarter that was negatively impacted by several one-time events, suggesting an improved sales trajectory in the second half of 2025 as the company moves past tougher year-over-year comparisons. However, significant headwinds persist. Sales in the Asia Pacific region, particularly China, are being suppressed by the government's volume-based procurement (VBP) program and an anticorruption campaign, with the company explicitly stating it does not anticipate improvement in 2025. Furthermore, intense competitive pressure in areas like U.S. electrophysiology and the impact of tariff-related costs are expected to erode MedTech profitability. Despite these challenges, JNJ's stock has outperformed its industry year-to-date, rising 9.7% versus the industry's 0.6%, and currently trades at a forward P/E of 14.43, below both the industry average of 14.99 and its own five-year mean of 15.73.

Key Decisions for Investors

• Investors should weigh the growth potential from J&J's recent acquisitions and new product cycle against the persistent and clearly articulated headwinds from China's VBP policy, which is expected to impact sales through 2025.
• Given the stock's valuation at a discount to both its industry peers and its historical average, current levels may offer a compelling entry point for those with a positive long-term view on the company's ability to manage competitive and geopolitical pressures.
• It is critical to monitor upcoming earnings for specific guidance on MedTech profit margins, as tariff costs are a known headwind, and for any quantitative updates on the financial impact of the VBP program in China.