Johnson&Johnson Valueline Outlook

The weak dollar continues to boost Johnson & Johnson’s top line. June period sales rose nearly 9%, to $16.5 billion, but about two-thirds of this advance was currency-related. The company also recorded healthy bottom-line growth, as share earnings of $1.17 were 11% higher than a year earlier. Research expense was roughly flat in the period, helping to boost margins. Looking ahead, we think the dollar may continue experiencing softness, so we have hiked our full-year sales estimate by $2.75 billion, to $65.75 billion. As a result, we now look for share earnings of
$4.70 this year, $0.20 higher than our previous estimate and a 13% increase from last year’s tally.

The rate of sales and earnings growth may well slow down next year. JNJ has performed exceptionally well recently, making for difficult comparisons in 2009. Also, the dollar is likely to stabilize relative to foreign currencies, which would reduce the positive impact of foreign sales.

The company outlined its growth strategies for the Medical Devices & Diagnostics (MD&D) and Consumer segments. At MD&D, the company plans to expand its leadership position in core
businesses, as well as penetrate highgrowth markets, such as orthopedics and obesity care. Further, this division plans to increase its presence in emerging markets, because these areas usually have inadequate medical supplies. At Consumer, the company is stressing science-based research into developing better products for everyday use.

This stock has many attractive characteristics. JNJ is ranked 2 (Above Average) for Timeliness. Long-term investors may also want to consider these shares. Although capital appreciation potential over the 3- to 5-year pull falls below the Value Line median, there are several positive factors. The company has excellent
brand recognition, a long history of solid growth, and a top-notch rating for Financial Strength. Too, the stock earns our Highest (1) rank for Safety, as well as top marks for Price Stability and Earnings Predictability. The healthy yield adds to JNJ’s appeal. We think these shares would be a good option for most investors, especially those with a conservative bent.
Tom Nikic August 29, 2008


2011-13 PROJECTIONS
-------------------------------------------------------Ann’l Total
------------------------Price----------- Gain----------- Return
High-------------------120-------------(+70%)---------16%
Low--------------------95--------------(+35%)-------- 10%