Will Johnson & Johnson (JNJ, $128.83) Lose Investor Interest in the Long Run?

Johnson & Johnson’s fourth quarter results reveal that sales were up just 1% to $20.4 billion, with adjusted net income coming-in at just $5.37 billion, which is $1.97 per share. These results gave evidence of gradual slowing compared to what this healthcare giant has witnessed in revenue growth recently.

A few items played significant roles in hurting J&J’s growth. Decreasing sales in certain quarters owing to negative currency effects; the net impact of acquisitions and divestitures during the year also affected performance without which worldwide sales would have risen 5.5%, with international sales climbing 7.8% and U.S. sales rising by 3.4% on an operational basis.

J&J’s pharmaceutical segment emerged as the market leader in 2018 and registered recorded sales after growing by 5.3%. But areas like neuroscience and cardiovascular still remain weak spots for the company. The consumer segment also saw an overall sales decline of 0.1%, while revenue in the wound care and baby care took the biggest hit.

Guidance indicates that the company expects to deliver sales in the range of $80.4 billion and $81.2 billion for 2019, and that's keeping the investors hopeful. It represents operational growth of just 0% to 1%, and even after making adjustments to those figures, growth could be limited to only 2% to 3% for the year.

In addition to poor sales growth, legal issues are also a concern. Litigation expenses almost doubled last year, owing to allegations from customers regarding safety issues with the company’s talc powder products that may be unfavorable for future customers.

What is more concerning now is that if the pharmaceutical segment fails to generate revenue, there is little for the company to attract investors.