J&J Joins The Elite

A solid blue-chip performer

When BLACK ENTERPRISE recommended health care products maker Johnson & Johnson (NYSE:JNJ) last May, we said the stock made a good core holding. Ten months later, J&J was added to the Dow Jones industrial average.

Owing to a lineup of strong brand names, including Tylenol, Bund-Aid and Neutrogena, the world’s second largest health care company had a banner 1996. The New Jersey-based company saw sales rise nearly 15% to $21 billion, with net earnings rising 16.7% to $2.17 a share. Shares rose 37% from our recommended price of $43.38, factoring in a two-for-one stock split, to a current $59.63. If you had invested $1,000 in J&J a year ago, your stock would now be worth about $1,370.

According to Zacks Investment Research, 17 of 24 brokerage analysts polled rate the stock a “buy” or “strong buy.” Moreover, they project earnings to rise 12% this year to $2.48 a share, and 14% in 1998 to $2.82. And, strong overseas operations along with a solid pipeline of new products, should fuel a 14% annual growth rate for J&J during the next five years, compared with 7% for the S&P 500.
Bruce Hawthorne of Paine Webber, who selected J&J last year, sticks by his pick. “After a run like that, the shares might seem a bit pricey, but I think this is still a good core holding.”

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