Battleground: Goldman says sell J&J, but Jefferies sees 'dividend machine'
This morning, Jefferies analyst Jeffrey Holford upgraded Johnson & Johnson (JNJ) to Buy as he believes its Pharmaceutical division will drive earnings per share growth and dividend momentum. This is the second upgrade of the Dow member's this week, as his peer at Wells Fargo also raised the stock's rating to Outperform, citing expectations for a reacceleration of the company's sales growth. However, not all are as bullish on Johnson & Johnson. Late last month, Goldman Sachs analyst Jami Rubin downgraded the stock to Sell. DIVIDEND 'MACHINE': In a research note to investors, Jefferies' Holford upgraded Johnson & Johnson to Buy from Hold and raised his price target on the shares to $157 from $145. The analyst pointed out that he believes the company's Pharma division is "under-modeled" by the street and will drive above consensus revenue and earnings per share growth, expecting the shares to re-rate to a 10% market premium. Multiple TIRADE pharma assets, as well as synergies from Actelion (ALIOF), will drive above consensus Pharma revenues, producing strong earnings per share momentum and better than expected dividends, he added. Moreover, Holford argued that instead of commentators focusing on an unlikely break-up of the business, Johnson & Johnson should be appreciated for being an "EPS growth and dividend machine." ACCELERATION AHEAD: On Monday, Wells Fargo analyst Larry Biegelsen also upgraded Johnson & Johnson to Outperform from Market perform and raised his price target on the shares to $149 from $140. Citing the accretion from Actelion, more measured impact from biosimilar competition than expected, solid performance of key drugs and a pipeline that is coming to fruition, the analyst told investors that he believes the healthcare giant is poised to reaccelerate its top-line growth. Further, Biegelsen argued that the company could continue to deliver margin improvement and faster earnings per share growth, while noting that he sees several sources of potential earnings per share upside in 2018. Additionally, he pointed out that concerns over Zytiga patent risk may be overblown with generic competition unlikely until at least October 2018. SELL J&J: Back on September 20, however, Goldman Sachs' Rubin downgraded Johnson & Johnson to Sell, while increasing his price target to $130 from $125. The analyst argued that pressure on key products combined with still-slow Medical Devices & Diagnostics growth and continued strains on the consumer will leave the company with below average, long-term growth. Rubin added that he prefers names like AbbVie (ABBV), Bristol-Myers (BMY) and Eli Lilly (LLY) with more identifiable, needle moving catalysts. PRICE ACTION: In morning trading, shares of Johnson & Johnson have gained almost 2% to $136.25. Since September 20, the stock is up roughly 1%. JNJ ALIOF ABBV BMY LLY