Is Johnson & Johnson a Buy After Its Latest Earnings Report?

On Wednesday morning, Johnson & Johnson (NYSE:JNJ) published its second-quarter earnings report, but this wasn't greeted warmly. Investors generally sold the stock, and by the end of that trading session, it was down by almost 3%.

This occurred on a broadly positive day for the stock market, with the bellwether S&P 500 index closing in positive territory. What did those selling investors find so unappealing about the pharmaceutical giant's figures, and was that reaction justified? Let's explore.

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Slightly better than expected

Perhaps the first source of discontent for Mr. Market is that, while Johnson & Johnson notched a double beat on analyst estimates, neither beat was crushing.

In the quarter, the company's total sales were a shade over $25.3 billion, which bettered the same period of 2025 by almost 7%. Yet they weren't vastly higher than the consensus pundit projection of $25 billion.

As for profitability, the dynamic was similar. Net income not under generally accepted accounting principles (non-GAAP, or adjusted) rose at a nearly 6% clip to $7.08 billion, or $2.90 per share. That was a few cents higher than the average analyst estimate of $2.86.

Johnson & Johnson is essentially two healthcare businesses in one: a massive pharmaceutical company and an important, influential medical device unit.

Of the pair, the former (officially known as "innovative medicine") is the larger; it brought in nearly $16.4 billion during the quarter, for a year-over-year improvement of almost 8%. Devices, or "MedTech," as the company calls this unit, saw a more modest lift of under 5% to slightly more than $8.9 billion.

Breaking down those results further, in the drug sphere, Johnson & Johnson did particularly well, with immunology drug Tremfya's sales growing a very robust 73% to $2 billion. This success is critical for the company as that medicine supplants an older immunology treatment, Stelara. The latter's sales are sliding rapidly, with a 56% decline (to $740 million) in the quarter.

Meanwhile, the company's oncology portfolio -- one of the strongest in the industry -- was looking robust. Its star drug in that lineup, blood cancer treatment Darzalex, posted a nearly 19% lift in sales to over $4.2 billion. Overall, the portfolio's sales rose by 17% to $7.4 billion.

As for medical devices, the overall growth in that business was overshadowed by a slump in one product line, Abiomed. This comprises the Impella small-form heart pumps, whose sales slid by 2% to $440 million. That was in marked contrast to the previous quarter, where Abiomed sales increased by 16%.

That wasn't necessarily a shocking development, as the results of a U.K. study published in late March in the always-influential New England Journal of Medicine indicated that Impellas might not be as suitable or beneficial for some high-risk coronary interventions as believed.

That sudden second-quarter decline in sales of those products suggests doctors might be concerned about the findings. And that Johnson & Johnson might not be doing enough to put them more at ease.

Boosting where it counts

Nevertheless, Johnson & Johnson sounded a quite robust note about its trailing performance and its near future. It quoted CEO Joaquin Duato as saying that the quarter highlighted "the power of our innovation, the depth of our portfolio and the momentum in our pipeline as we advance transformative treatments that address the world's toughest health challenges."

It's clearly more confident it'll play a crucial role in this, as it raised its guidance for all of 2026. Headline sales should come in at $100.8 billion to $101.4 billion; the previous forecast was $100.3 billion to $101.3 billion. Adjusted earnings per share (EPS) are estimated at $11.60 to $11.75 for the year. That supplants the former guidance range of $11.45 to $11.65.

To me, while Johnson & Johnson's second quarter wasn't the disappointment indicated by that Wednesday sell-off, it wasn't a blowout either. I think the company is doing well, but investors might be looking elsewhere since other major pharmaceuticals have delivered more impressive growth.

I'm bullish on this one's future, though, so I think the post-earnings slump makes it something of a bargain buy.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.