Does Johnson & Johnson Belong in Your Portfolio?

With shares of Johnson & Johnson (NYSE:JNJ) trading around $103, is JNJ an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Johnson & Johnson engages in the research and development, manufacturing, and sale of various products in the healthcare field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company offers a range of products used in general care, women’s health fields, nutritional and anti-infective, contraceptive, gastrointestinal, oncology, pain management, and vaccines. It also offers products to treat cardiovascular disease, orthopedic and neurological products, blood glucose monitoring and insulin delivery products, and general surgery products. Through its wide variety of healthcare products, Johnson & Johnson is able to support consumers and medical businesses around the world that continue to demand improved products.

Johnson & Johnson today announced sales of $19.5 billion for the second quarter of 2014, an increase of 9.1% as compared to the second quarter of 2013. Operational results increased 9.4% and the negative impact of currency was 0.3 percent. Domestic sales increased 14.9%. International sales increased 4.4 percent, reflecting operational growth of 5.0% and a negative currency impact of 0.6 percent. Net earnings and diluted earnings per share for the second quarter of 2014 were $4.3 billion and $1.51, respectively. The second-quarter results included a charge for after-tax special items of approximately $0.4 billion, primarily related to an increase in the litigation accrual as well as integration and transaction costs related to the acquisition of Synthes, Inc. Second-quarter 2013 net earnings included a charge for after-tax special items of approximately $0.5 billion. Excluding these special items, net earnings for the current quarter were $4.8 billion and diluted earnings per share were $1.66, representing increases of 11.3 percent and 12.2 percent, respectively, as compared to the same period in 2013.

“Our strong second-quarter results reflect the continued success of our new product launches and the progress we have made in achieving our near-term priorities,” said Alex Gorsky, Chair and Chief Executive Officer. “Significant advancements are being made in the treatment options and access to care for patients and customers around the world. Our diversified business model, focus on long-term growth drivers and talented colleagues position as well in this evolving and dynamic global health care market.”