Johnson & Johnson has a chance to show it’s more than just a rotation winner
Johnson & Johnson shares showed signs of life ahead of earnings. For the stock to continue doing well, the healthcare giant needs to show investors that its most promising drugs are still gaining ground. J&J’s climb back to record highs exactly a week ago was driven in large part by a marketwide shift toward lagging healthcare stocks and away from big winners tied to the building of AI infrastructure. But since then, the stock has lost several points, in line with the S&P 500’s healthcare sector, as the Iran war escalates again, dragging down much of the market outside energy and technology. Hospital operator HCA Healthcare’s weak preliminary earnings report weighed on the group in Tuesday’s session. However, its second-quarter earnings report due Wednesday morning is J&J’s chance to prove that its businesses, from pharmaceuticals to medical technology, are performing well enough for investors to stick around and bet on more upside from here on out. The average price target among analysts of around $254, according to FactSet, doesn’t indicate much daylight, as that’s where the stock traded Tuesday afternoon. Our price target is slightly higher, at $265; It’s down a few dollars from last Tuesday’s highs. We are among the like-minded with our buy equivalent rating of 1; Almost 70% of analysts covering the stock agree. But for now, it’s too close to a win for Jim Cramer to recommend any move. “I’m not going to go out on a limb and buy J&J until we know more,” he said during Tuesday’s Breaking Morning. As of Monday’s close, J&J’s shares were up more than 14% since the beginning of June, making it one of the Club’s biggest gainers during that period. One of the two better stocks, Club stock Cardinal Health, is up roughly 19%, underscoring the market’s tilt toward healthcare names that were left behind in this spring’s surging rally in chip stocks and other AI hardware makers. Through Monday, the healthcare sector was up 8.7% since the beginning of June, easily outperforming chip stocks that were down 2.7%. Healthcare is a classic defensive sector, so while the AI trade was shaky and investors took profits from first-half winners, more money flowed into companies like J&J, Cardinal, and our other Club healthcare name, Eli Lilly. Cardinal and Lilly also posted new record closes last week before pulling back modestly, as did J&J in recent sessions. J&J went almost four months between record closes. After finishing at $248.56 on March 2, the stock would decline nearly 11% to its bottom on May 8. It hit its old peak on June 26 and continued to close last Tuesday at about $267 per person. We’ve owned J&J since early April. “The biggest driver was the market moving more defensively from technology to healthcare,” Leerink biopharma analyst David Risinger said in an interview about the industry’s recovery rally. “But in addition, the underlying fundamentals have been encouraging recently.” In other words, companies including J&J have a chance to confirm their comeback this earnings season. JNJ YTD mountain J&J’s stock performance so far in 2026. One of J&J’s top drugs is blood cancer treatment Darzalex, which rose 18% to $3.96 billion in the first quarter, excluding foreign exchange benefits. It’s now by far J&J’s best-selling drug and a key part of the company’s efforts in oncology. The consensus for the second quarter is $4.24 billion, representing 19.8% annual growth, according to FactSet. J&J CEO Joaquin Duato said in J&J’s April earnings call that Darzalex “remains the gold standard” in treating multiple myeloma. “We have a bold ambition to be the No. 1 company in oncology by 2030,” Duato said in a May interview with CNBC, explaining that J&J is investing heavily in its resources to get “closer” to its goal of eliminating cancer. Carvykti is another important J&J cancer drug, although it is much smaller than Darzalex. Carvykti rose 57% to $597 million last quarter, and analysts expect it to grow 49% to $654 million in the second quarter. Although both are used to treat multiple myeloma, Carvykti is a type of personalized therapy that helps the patient’s immune system attack the cancer. Think of Carvykti as a more specialized therapy; Darzalex is an antibody used as a spine treatment. Patients with multiple myeloma often take more than one type of medication, explaining why J&J has a broad portfolio for the disease. Away from cancer, investors will focus on the performance of J&J’s immunology line, led by Tremfya, now its second-largest drug after Darzalex. Belonging to a class known as IL-23 inhibitors, Tremfya is used to treat plaque psoriasis, psoriatic arthritis, and digestive disorders under the inflammatory bowel disease umbrella. In the first quarter, injectable Tremfya increased revenue by 64% to $1.6 billion. Tremfya is now a leader in emerging inflammatory bowel disease in the U.S. and is helping to fuel this wave of growth, the company said. Analysts expect Tremfya sales to be $1.78 billion in the second quarter, representing 50% year-over-year growth, according to FactSet. J&J’s updates on its recently launched Icotyde will be important to Wall Street’s reaction. Like Tremfya, Icotyde blocks the IL-23 receptor to treat inflammation. The big difference: Icotyde is the first daily pill in the IL-23 inhibitor class. In the second quarter, Icotyde’s revenue contribution will likely be minimal, given that the Food and Drug Administration only came through in mid-March. It is currently approved for the treatment of moderate to severe plaque psoriasis, with the goal of more indications in the future. J&J is counting on the drug to be its next cash cow and has said it could be one of the biggest drugs ever. That’s why investors want the latest on prescription trends and interest in the psoriasis market. In a note sent to clients last week, analysts at Goldman Sachs said a recent survey of experts supported J&J’s belief that Icotyde could eventually generate at least $10 billion in annual revenue. Of course, analysts with a $275 price target and a buy rating on J&J said the company likely won’t grow Icotyde revenue this quarter because the launch is still so early. Darzalex, Tremfya and Icotyde are part of J&J’s Innovative Medicine division, which is the official name for its pharmaceutical business. Innovative Medicines accounted for nearly two-thirds of J&J’s $94 billion in revenue last year. The remaining third came from MedTech, home to the medical devices and surgical products businesses. Innovative Medicine and MedTech became the heart of J&J following the 2023 departure of its consumer health division, which sells products such as Band-Aid, Tylenol, Neutrogena and its namesake baby powder. That business has become an independent company called Kenvue, which is in the process of being acquired by Kleenex maker Kimberly-Clark. Innovative Medicine is not only much larger than MedTech, it is also growing faster; It recorded 7.4% growth in the first quarter compared to MedTech’s 4.6%. In the three months ending in March, J&J said Innovative Medicine showed double-digit growth in 10 of its drugs. One drug excluded from this list is Stelara, a former blockbuster for J&J that treats conditions similar to Tremfya. But J&J lost exclusivity for the drug in 2025, leading to a sharp decline in sales due to competition from cheaper biosimilar alternatives. Stelara’s first-quarter revenue of $656 million was down 62% from a year earlier. Wall Street expects a decline of similar magnitude in the second quarter, according to FactSet. RBC Capital analyst Shagun Singh said in an interview that Innovative Medicine will focus on growth minus Stelara. More generally, Singh said he was pleased with J&J’s positioning of itself in both remaining segments. “These are non-elective categories where if you have a heart attack you have to go there. If you have cancer you have to take your medications,” said Singh, who has a buy equivalent rating on the stock and a $265 price target. Within J&J’s MedTech business, Singh noted that cardiovascular care is currently the most important end market. While this rate increased by 10.5 percent in the last quarter, this rate was 1.2 percent in surgery, 3.6 percent in the field of vision and 3.2 percent in orthopedics. Investors will be watching MedTech results closely in light of HCA Healthcare’s warning on Tuesday about a decline in surgical procedure volume. In October 2025, J&J announced it would separate its orthopedics business, which produces products used in joint reconstructions, among others. J&J said it is considering multiple options, including a potential sale or spinoff. Whichever path J&J chooses, the result is that the remaining company should have a more streamlined focus and improved growth rate; this combination could result in Wall Street assigning a higher value to the stock. Overall, we are optimistic about Johnson & Johnson’s commercial portfolio and next-generation pipeline, which is why we chose the company over rival Bristol-Myers Squibb when we exited this position in April. We made a decision to improve the quality of the companies in our portfolio and it has proven to be the right move so far. During our June Monthly Meeting, Jim Cramer argued that investors should buy J&J, which is trading at $230, highlighting its quality. When high-quality stocks trade lower, with no significant change in their earnings outlook, it means they are cheap, he said. “If you don’t have one, buy one,” he said. With earnings due on Wednesday morning and stocks set to move higher, we recommend waiting until you see the numbers before taking any action. But if Wednesday’s encouraging report is met with more profit-taking, the opportunity to buy more shares could be knocking on your doorstep again. We will find out soon. (Jim Cramer’s Charitable Trust is long JNJ, CAH and LLY. See here for a full list of stocks.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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