Johnson & Johnson surprises with Q1 results but shares decline 📉

Despite posting stronger-than-expected first-quarter earnings, Johnson & Johnson (JNJ.US) failed to win over investors. The stock slipped slightly on Tuesday, reflecting broader concerns around potential drug tariffs and ongoing legal challenges. Shares fell nearly 1% in premarket trading to around $153, while S&P 500 and Nasdaq futures traded flat—highlighting that the market is no longer reacting enthusiastically to positive earnings alone. The American healthcare giant, with deep roots in pharmaceuticals, biotechnology, and medical technologies, can still boast a solid start to 2025.

Q1 2025 Results J&J:

• Earnings per Share (EPS): $2.77 vs. $2.69 expected

• Revenue: $21.9 billion (+2.4% YoY)

• Updated Operational Sales Outlook (2025): Raised to $92 billion

• Full-Year Earnings Outlook: Maintained at 6.2% midpoint growth

The company also revised its full-year forecast following the completed acquisition of Intra-Cellular Therapies and the addition of Caplyta—a treatment for bipolar disorder and depression—to its portfolio.

Segment performance

Johnson & Johnson's pharmaceutical segment grew 4.2%, driven by increased sales in oncology, immunology, and cardiovascular therapies. Its MedTech division also expanded 4.1%, supported by acquisitions and asset disposals.

Key regulatory wins:

• FDA approval of Tremfya for treating Crohn’s disease

• EU approval of Rybrevant for specific types of lung cancer

These developments reinforce the company's strength in high-demand specialty drug markets.

Tariffs and Lawsuits: Ongoing Headwinds

Investor concerns have been further fueled by signals out of Washington. Former President Donald Trump recently hinted at new tariffs targeting the pharmaceutical sector. Just before the earnings release, regulators launched an investigation into U.S. drug imports—potentially laying the groundwork for further trade restrictions.

This uncertainty likely contributed to the market’s muted response to the otherwise strong earnings.

Simultaneously, J&J continues to battle long-standing legal cases related to its talc-based baby powder. In March, a Texas court blocked the company’s attempt to offload legal liabilities through a bankruptcy filing by its subsidiary, Red River Talc.

• J&J claims the lawsuits are unfounded and based on “junk science.”

• The company alleges part of the litigation is funded by foreign investment funds.

• J&J has stated it will not settle and plans to recover up to $7 billion from legal reserves.

Despite ongoing legal and macroeconomic risks, Johnson & Johnson remains a favored defensive play. Its diversified product base and exposure across healthcare segments provide stability during turbulent times. Still, the brewing trade war scenario could weigh on sentiment, which might explain Wall Street’s current caution. Since the announcement of potential drug tariffs on April 2, J&J shares have slipped only 0.6%, while the S&P 500 is down nearly 5% over the same period. Year-to-date, J&J stock is up over 6%, a strong performance compared to the broad market’s 8% decline.

Earnings Summary

• Beat expectations on both revenue and EPS

• Raised 2025 operational sales guidance

• Growth in pharma and MedTech divisions

• Facing tariff risk and talc-related lawsuits

• Stock remains a defensive play in volatile markets

Johnson & Johnson Stock (Daily Chart)

While J&J shares have gained modestly this year, the stock remains in a longer-term downtrend. A key technical resistance level sits at the 200-day EMA (~$157). Despite its solid business, the current P/E ratio of 18 appears relatively high, especially considering the company operates in a mature, less growth-oriented sector that could be impacted by future pharma tariffs.

Source: xStation5

Jonhson & Johnson Financial dashboard

Source: XTB Research, Bloomberg Finance L.P.