J&J looks to bolster cardiology devices segment
Growth in the segment has stunted over the past few years, prompting the new CEO to look at acquisitions.
J&J operates in three important segments: consumer, pharmaceuticals, and diagnostics. It competes with Pfizer (PFE), Merck (MRK) and Abbott Labs (ABT).
We maintain a $72.45 price estimate for JNJ, which is nearly 10% above the current market price, largely based on our long-term outlook for the company.
According to our estimates, J&J's market share in stents, catheters and other medical devices will stagnate over our forecast period. This is largely due to discouraging results from its cardiovascular devices segment in the past five years.
However, newly appointed CEO Alex Gorsky is looking at acquisitions to reinvigorate the segment with products such as heart valves. The possible takeover targets are Edwards Lifesciences (EW) and St. Jude Medical (STJ), according to Bloomberg.
Edwards Lifesciences holds half of the heart valves market, while St. Jude enjoys the highest operating margins in the industry. Some of J&J's products have performed miserably in terms of quality. Several over-the-counter products of the company were recalled because of foul odors and adulterated ingredients.
We expect these acquisitions will help J&J gain market share in cardiology devices. Stents, catheters and other medical devices account for 18% of Trefis price estimate for JNJ stock, by our analysis.
More from Trefis:
Copyright © 2014 Microsoft. All rights reserved.
What does the country have to do with the price-to-earnings ratio of the S&P industrials? From here on in, everything.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.