Cramer: JNJ's Legal Woes Overshadow Strong Earnings
Friday, Jan 10, 2025 5:01 pm ET
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In his latest appearance on CNBC's Squawk on the Street, Jim Cramer discussed Johnson & Johnson (JNJ) and its recent earnings report, highlighting both the company's strengths and the challenges it faces. JNJ reported second-quarter earnings in July 2025, beating Street expectations with $2.80 per share, compared to the expected $2.62. The company also reported $25.53 billion in revenue and raised its full-year guidance. Despite these positive results, JNJ's stock price has decreased by 12% over the past year as higher costs from inflation have increased its spending to develop new drugs.
Cramer praised JNJ's diversified healthcare and general wellness portfolio, stating that the company is a "great American company" and that its shares have been a "great investment." However, he also expressed concerns about the company's talcum powder cancer lawsuit, which has resulted in more than $6 billion in claims. In January 2025, Cramer admitted that he had misjudged the severity of the litigation and decided to sell his position in JNJ, stating that he could not have a position that is "precarious because of litigation."
Cramer's perspective on JNJ aligns with the broader market sentiment towards the healthcare sector, which he believes is hostage to rates. He mentioned a piece in the Financial Times that commented on private equity and private equity trying to get into the 401(k) business, with Marc Rowan, CEO of Apollo, jokingly saying that they have leveraged their entire retirement to NVIDIA's performance. Cramer also mentioned that there are two markets: the inexpensive market, which includes materials and banks, and the expensive market, which includes enterprise software.
However, Cramer also believes that technology valuations might appear to be overstretched, but this isn't the case with banks. He shared that the valuation problem is with the stuff that keeps getting upgraded, which is enterprise software. So, there's a little duplicitous nature among the top people who work at these firms because they should be saying that there are two markets: the inexpensive market and the expensive market.
In conclusion, Cramer's view on JNJ is mixed, as he acknowledges the company's strengths but also expresses concerns about its legal issues and the broader market sentiment towards the healthcare sector. He believes that the healthcare sector, including JNJ, is hostage to rates, and no one wants these stocks. However, he also believes that technology valuations might appear to be overstretched, but this isn't the case with banks. Investors should carefully consider the risks and opportunities presented by JNJ and the broader healthcare sector before making investment decisions.