Johnson & Johnson (JNJ) Raised Its Outlook. Is It the Better Healthcare Stock to Own After Earnings?

Johnson & Johnson (JNJ) Raised Its Outlook. Is It the Better Healthcare Stock to Own After Earnings?

Noor Ul Ain Rehman

Mon, July 27, 2026 at 11:57 PM GMT+3 4 min read

• JNJ +0.29%

Johnson & Johnson (NYSE:JNJ) delivered strong fiscal Q2 2026 results, with sales for the quarter growing nearly 7% to $25.31 ⁠billion, above analysts' average estimate of about $25.05 billion. Adjusted earnings per share reached $2.90, surpassing the expectation of $2.85. The company also raised its full-year guidance and is on track to surpass $100 billion in annual revenue in 2026 for the first time in its 140-year history.

The company's results suggest that its strategy of offsetting patent-related headwinds with newer growth products is gaining traction, an encouraging sign for long-term investors. So, is it a better healthcare stock to own after earnings?

Bull Case

Johnson & Johnson's (NYSE:JNJ) pharmaceutical unit helped increase total sales, generating $16.38 billion in quarterly sales and exceeding analysts' estimate of $16.1 billion. The healthcare giant now expects its annual sales to be around $101.1 billion at the midpoint, ​compared with $100.8 billion ⁠previously. In another optimistic feat, it raised its adjusted earnings per share forecast to $11.68 at the midpoint, from a previous $11.55 per share.

Revenue from Johnson & Johnson's (NYSE:JNJ) Stelara, which treats psoriasis, Crohn's disease, and ​other autoimmune conditions, dropped over 55% in the quarter to $740 million due to patent loss. However, the company's cancer and newer immunology drugs can be seen countering this loss, as sales of Tremfya, its psoriasis and inflammatory bowel disease drug, rose 72.5% to $2 billion, considerably exceeding the estimate of $1.74 billion.

The most encouraging sign for investors may thus be Johnson & Johnson's (NYSE:JNJ) ability to absorb a significant patent-related decline in Stelara sales while still raising its full-year outlook. Strong performance from newer drugs such as Tremfya suggests the company's pipeline is successfully offsetting losses from older products, and this marked one of the reasons the company was upgraded to Buy from Hold by Freedom Broker, with the firm lifting the price target to $280 from $230 due to "a strong quarterly performance" that exceeded both consensus forecasts and the firm's estimates.

The firm raised its confidence in the company's goal to exceed its strategic target of $100 billion in revenue in 2026, supported primarily by factors such as Johnson & Johnson's (NYSE:JNJ) improving investor sentiment towards the healthcare sector, solid progress on its key growth drivers, raised full-year revenue and EPS guidance, and "above all, its new medicines".

Bear Case

Investors should continue monitoring the pace of Stelara's erosion over the coming quarters. While newer medicines have more than offset the decline thus far, sustaining that momentum will be critical as biosimilar competition intensifies and older blockbuster products contribute less to overall growth. The investment thesis increasingly depends on Johnson & Johnson's newer products continuing to deliver strong growth.

The company's MedTech segment was comparatively less impressive during the quarter, with sales slightly missing expectations. Management attributed some of the weakness to temporary headwinds, including inventory-related pressures in China that weighed on Electrophysiology sales and softer U.S. procedure trends affecting Abiomed. While Johnson & Johnson expects these challenges to improve over time, investors may want to watch whether its MedTech business returns to its historical growth trajectory in the coming quarters. Sustained weakness in these businesses could limit the company's ability to diversify its growth beyond pharmaceuticals.

Johnson & Johnson (NYSE:JNJ) currently trades at a forward P/E of 22.56, at a 16.39% premium to the healthcare sector. While the valuation suggests investors are willing to pay more for the stock than they do for many of its peers, the premium may reflect growing confidence in the company's pharmaceutical pipeline, raised guidance, and ability to navigate patent-related headwinds.

According to Insider Monkey data, the company also seems to be growing in popularity among hedge funds, with its ownership going from 104 in fiscal Q4 2025 to 113 in fiscal Q1 2026. Some notable stakes for Johnson & Johnson (NYSE:JNJ) come from Fisher Asset Management, GQG Partners, and AQR Capital Management, with Balyasny Asset Management's position jumping by 1,411% to $146 million.

Despite the optimistic outlook, investors should continue monitoring the pace of Stelara's decline and whether Johnson & Johnson's newer drugs can sustainably offset those losses. The stock's premium valuation also leaves less room for execution missteps if growth moderates in the coming quarters.

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