Johnson & Johnson (JNJ) Stock Slips to $166 as Q2 Free Cash Flow Falters

Johnson & Johnson (NYSE:JNJ) Faces Mixed Momentum at $166 as MedTech Strength Offsets Pharma Drag

Q2 Earnings Beat Expectations but Free Cash Flow Deteriorates

Johnson & Johnson (JNJ) closed at $166.22 after dipping -1.24%, as investors weighed strong Q2 revenue growth against weak cash flow and growing biosimilar competition. The company posted Q2 revenue of $23.743 billion, beating the consensus of $22.85 billion and growing 5.8% YoY. Net earnings rose 18.2% YoY to $5.537 billion, with adjusted EPS landing at $2.77, ahead of the $2.68 estimate.

However, free cash flow declined 17.4% YoY, from $7.507 billion to $6.2 billion, flagging efficiency pressures despite topline expansion. JNJ raised its full-year sales forecast to $93.2–$93.6 billion, with updated EPS guidance of $10.80–$10.90, implying 8.7% annual EPS growth at midpoint.

MedTech Outperforms While Innovative Medicine Battles Stelara Headwinds

The MedTech division led upside momentum with $8.5 billion in revenue, driven by strong demand in cardiovascular electrophysiology and general surgery. The unit beat consensus and offset softness in orthopedics and COVID-related device normalization. Sales climbed despite currency drag and competitive pricing in hospital systems.

Pharmaceutical revenue rose to $15.2 billion, fueled by robust growth in Darzalex, Carvykti, and Tremfya. However, Stelara’s revenue slipped to $1.7 billion, below forecasts, as biosimilar erosion accelerated. The drag pulled pharma segment growth below 3%, despite the success of new immunology launches and solid neuropsychiatric uptake.

Valuation Holds, but Dividend Safety Draws the Spotlight

JNJ trades at 15.3x forward earnings, a moderate discount versus historical averages, with a dividend yield of 3.07% that remains firmly supported by free cash flow coverage—despite recent compression. The payout ratio stands at roughly 45%, keeping the AAA credit profile intact.

However, declining free cash flow raises questions about future dividend hikes. Any further deterioration, especially if R&D or capital expenditure rises in H2, could slow dividend growth in 2026 and beyond.

Pipeline and Strategic Execution Anchor Long-Term Potential

Pipeline updates from TAR-200, CARVYKTI survival data, and the OTTAVA surgical robotics program suggest long-term competitive advantage. The CARVYKTI expansion into earlier multiple myeloma lines could prove transformative, especially if follow-on trial data due in Q4 supports broader label adoption.

TAR-200, currently under FDA priority review, targets bladder cancer with unmet clinical need. Approval in early 2026 would unlock a $1B+ market, bolstering JNJ’s oncology franchise after Imbruvica and Zytiga erosion.

The robotic platform OTTAVA continues to position JNJ as a MedTech AI innovator, though rollout delays and CapEx burn remain risks until market entry in late 2026.

Technicals Show Breakdown Risk as RSI Sinks and Volume Swells

At $166, JNJ trades below its 20-day and 50-day EMAs, and a breakdown below $164 support could open risk to $158, where strong institutional buying last emerged. The RSI sits below 42, confirming waning momentum without reaching oversold thresholds. Unless shares reclaim $170.50, the path of least resistance remains sideways-to-lower.

Options data shows rising put volume at $160 strikes, with hedging activity clustering into September, suggesting short-term caution from large holders.

Verdict: JNJ Is a Hold Below $168, Eyes $160 Support Before a Clear Reversal

Johnson & Johnson remains a defensive healthcare leader with quality cash flows, a strong dividend, and resilient MedTech tailwinds. However, the pharma segment faces structural pressure, and free cash flow weakness clouds the outlook. At $166, shares are fairly valued but lack near-term upside catalysts.

If the stock holds above $160, and CARVYKTI/TAR-200 milestones materialize on time, upside to $180 becomes possible. Until then, JNJ is a HOLD — not a Sell, but lacking the momentum or valuation gap to be a Buy at current levels.

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