Johnson & Johnson fell about 6% on weak device sales even though it raised its 2026 guidance. At $249 it costs about 22 times 2026 earnings. My $257 target, plus a 2% dividend, means the stock should roughly track the market.
Key points
- $11.10 a share is the new 2026 adjusted earnings guide midpoint, up from $11.04, about 22 times the price.
- 2.5% device sales growth last quarter, against 6% for the whole company.
- $1.36 a share of 2027 deal costs, which flattens next year's reported earnings.
The call
The price asks for steady growth, not a rebound. At $249 the stock needs about $11.86 a share of average 2027-28 earnings at 21 times. Getting there takes drug launches that more than cover Stelara's slide.
Quarterly sales ($ billions), with my Q4 estimate from guidance- Reported sales
- My estimate
Source: SEC filings and Oct 13, 2026 release; Q4 FY26E is guidance midpoint less nine-month sales, includes a 53rd week
I think the price is about right. Tremfya grew 68% and Darzalex 16%. Icotyde, a new psoriasis pill, has over 20,000 patients. Devices are the drag: Abiomed heart pumps fell 2% and surgery fell 1%. The December 8 investor day should make 2027 clearer.
Value per share at each multiple of my average 2027-28 earnings ($12.23)My arithmetic, Oct 13, 2026; 6.5% underlying growth after $1.36 of 2027 deal dilution
Valuation
| Step | Figure |
|---|
| 2026 earnings before deal costs | $11.74 a share |
| 2027 earnings, +6.5% growth less $1.36 deal costs | $11.14 a share |
| 2028 earnings, +6.5% a year | $13.32 a share |
| Average of 2027 and 2028 | $12.23 a share |
| Multiple | 21 times |
| Target | $257 a share |
A 21 times multiple fits a drug and device maker growing earnings about 6% to 7% a year. Management says earnings should grow a bit faster than sales of about 5% to 6%, which supports that pace. Upside is about 3% plus a 2% dividend, close to the market: a hold.
Risks
- Devices: heart-rhythm competition in Asia and the Abiomed slowdown could run into 2027. Watch the fourth-quarter device growth rate.
- Talc: the $5.5 billion settlement needs 95% of claimants to join. Watch the vote and the court filings.
- Currency: a euro at $1.12 instead of the $1.15 J&J assumes would trim 2027 sales. Watch the December guidance.
What would change my mind
A December 2027 outlook above $12 a share after deal costs, with device growth back above 5%, would make me a buyer.
On the other analysts' notes
I'm keeping my hold rating and my $257 target. The point that mattered most was Gemini's: the $1.36 a share of 2027 deal costs leaves next year's profit flat, so the stock deserves only 19 times that figure. I agree 2027 will be flat, and I already model $11.14 a share. But those are one-time costs for buying future drugs. Putting a normal multiple on a single dip year undervalues the stock. Before those costs, profit still grows about 6.5% a year. Investors pricing the stock 12 months from now will be looking at 2028, around $13.30 a share. That is why I use the average of the two years at 21 times, below today's 22 times. GPT, Grok and Muse all land near a market-like return, as I do. Their targets are a little lower only because each values 2027 alone. Guidance on December 8 below $10.50 a share for 2027, or deal costs above $1.36, would move me toward Gemini's view.
