Investors of all stripes like Johnson & Johnson (NYSE:JNJ) because its careful assembly of related healthcare businesses has allowed the conglomerate to report steady earnings growth for 35 straight years. Merck & Co. (NYSE:MRK), meanwhile, relies on pharmaceuticals for nearly all of its revenue, which has made its bottom line far less predictable.

Merck hasn't reported earnings growth since it bought Schering-Plough a decade ago, but a star cancer therapy could make this a banner year for the big pharma. Despite their past performances, deciding which has a better chance to outperform won't be as easy as it seems. Here's what you need to know about the case for both stocks to decide which is a better pick right now.

Well-dressed game of tug-of-war.

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The case for Johnson & Johnson

Johnson & Johnson expects sales to dip by about 1% in 2019 due to loss of exclusivity for Remicade and continued pricing pressure. In 2018, less expensive biosimilar versions of the anti-inflammatory injection pushed Remicade sales down 15.7% compared to a year earlier.

Middlemen that control access for competing drugs have been demanding increasingly large rebates to keep J&J's drugs on accessible tiers within their formularies. Despite raising list prices for successful drugs that still have market exclusivity, Johnson & Johnson actually lowered net sales prices across its entire U.S. pharmaceutical portfolio by 6% to 8% last year.  

Investors aren't too worried because Johnson & Johnson still has 26 different brands or platforms with over $1 billion in annual sales. While Remicade and Zytiga losses this year will sting, around a quarter of total sales come from products less than five years old that still have room to grow.

There are signs of encouragement for the pharmaceutical segment that contributed $40.7 billion in sales to the top line last year, which was about half of total revenue. A new psoriasis treatment, Tremfya, finished its first full year on the market with sales that reached $544 million.

Annual sales of Cosentyx, a psoriasis treatment that Novartis (NYSE:NVS) launched a few years ago, soared to $2.8 billion in 2018, and there's a good chance Tremfya will do even better. In December, J&J showed us that Tremfya beat Cosentyx in a head-to-head trial. An impressive 86.5% of patients receiving Tremfya achieved a 90% improvement, compared to just 70% of those given Cosentyx.

Despite predicted stagnant sales in 2018, Johnson & Johnson shares have been trading at 15.6 times forward earnings estimates. That's just about even with the average stock in the benchmark S&P 500

The stock offers a 2.7% dividend that will probably still be rising decades from now. J&J's raised its payout for 56 consecutive years, and the dividend's still well funded. Johnson & Johnson generated a record-high $18.6 billion in free cash flow last year and used just half of those profits to meet its dividend obligation.

Smaller gold-and-silver capsules spilling out of a big gold-and-silver capsule split in half lying on top of a pile of cash.

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The case for Merck & Co.

Sales across Merck's entire pharmaceutical portfolio went up 6% last year to $37.7 billion, and animal health sales rose 9% to $4.2 billion. Overall, Merck's expecting top-line sales to rise between 2% and 4% in 2019.

Januvia, Merck's aging diabetes treatment, contributes around 14% of total sales. Fierce competition for access to diabetes patients caused sales to flatline in 2018, and they could be at risk again this year.

Merck's vaccine sales have been strong, but Keytruda will largely be responsible for pulling this train uphill in the years ahead. Luckily, the cancer immunotherapy appears up to the task. Adding Keytruda to standard chemo reduced lung cancer patients' risk of death by half compared to standard care on its own.

There are competing treatments similar to Keytruda, but it looks like around 85% of the overall lung cancer population will be using Merck's treatment first, which will drive demand through the roof. In 2019, the American Cancer Society expects lung cancer to claim 142,670 lives, which is more than colon, breast, and prostate cancer combined. 

Last year, Keytruda sales soared 88% to $7.2 billion and it isn't finished rising yet. As Merck continues to dominate the enormous lung cancer indication, Keytruda sales could double in a few short years.

Merck's been trading at 16.3 times forward earnings expectations, which is just slightly higher than Johnson & Johnson. Merck's operations produced an impressive $8.9 billion in free cash flow over the past year. The company used a comfortable 58% of free cash flow to make payments on a dividend that offers a 2.9% yield at the moment. 

Scientist with protective gear looking real close at a capsule.

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The better buy

Right now, Johnson & Johnson shares seem a little expensive given the company's dour outlook for the year ahead. Merck, on the other hand, has a chance to grow earnings and its dividend payout by double digits annually for the next several years.

If you're nearing retirement, or just cautious, J&J is an excellent choice. For most investors, though, Merck's more visible path to significant growth makes it the better buy right now.

Cory Renauer owns shares of Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. The Motley Fool has a disclosure policy.