Will Johnson & Johnson Be Hurt by Its Sunscreen Product Recall?

Johnson & Johnson (JNJ -1.41%) has experienced its fair share of product quality issues in the past. Now, the healthcare giant has another one on its hands with a voluntary recall of some of its spray sunscreen products. In this Motley Fool Live video recorded on July 19, healthcare and cannabis bureau chief Corinne Cardina and Motley Fool contributor Keith Speights discuss how this latest recall might impact J&J.

Corinne Cardina: Let's talk about some more drama in the healthcare world. Probably not the first time we've talked about Johnson & Johnson and their product safety liability issues. They are recalling some batches of spray sunscreen products when samples turned up a potential carcinogen in these products.

My mom and I, we just want to the beach last week, turns out I sprayed myself from head to toe with one of these special carcinogenic sunscreen products. That was great. My mom and I went through a batch of sunscreen. We found out through away two, they were like $15 each, so super.

This is like Neutrogena and Aveeno sunscreen. Sometimes you don't always remember that Johnson & Johnson owns these brands. Take a look at your sunscreen cache, make sure you don't have any of these.

But product safety issues aren't new for Johnson & Johnson. Of course, there was the talcum powder debacle which has been decades in the making when they were required to pay two billion dollars for selling powder products that contained asbestos which is a cancer-causing substance. But Johnson & Johnson is so big that a lot of its damages end up looking like the cost of doing business.

Keith, what should investors know so consumers should know throw away these five specific sunscreens, and if maybe you want to look for sunscreen alternatives that aren't manufactured by Johnson & Johnson? But anyway, what should investors know? Has the impact of Johnson & Johnson's stock? What do you think?

Keith Speights: Yeah, not really. I think investors should remember four words: "this too shall pass." Corinne, you mentioned Johnson & Johnson has encountered other issues in the past. Back in the '80s, it had its biggest deal, the Tylenol scare. Johnson & Johnson handled that crisis so well that it became standard fare in business schools in terms of learning how should a company handle a public relations crisis.

J&J has been around a long time. They've been down this road with issues in the past and the company knows how to move past them. You're right, Johnson & Johnson is just so huge that issues that would cause major problems for a lot of other companies really don't impact J&J all that much in terms of financial impact or the stock impact.

My hunch is that the recall of these sunscreen products won't be nearly as significant, for example, as the asbestos baby powder and talcum powder issue was for the company. The carcinogen in question in this recall is benzene. It's not an ingredient in any of these recalled products. Johnson & Johnson is investigating how benzene got into some of the batches. They don't know that it's in all of the products, but they're saying you want to be careful and not use the products just in case, which is prudent.

At the Fool, Corinne, we often talk about the best stocks to buy are companies that have strong moats. By that, we mean companies that have competitive advantages that help keep them stay on top. The best moats don't just keep competitors at bay though, they also help insulate companies against any issues that crop up, such as product recalls and bad publicity.

So I think what we're seeing and will continue to see, Johnson & Johnson has the strong moat that enables it to keep on chugging despite setbacks like this, despite setbacks like the talcum powder issue, the Tylenol issue, this company will keep on going.

You mentioned, is this just the cost of doing business? You don't want to think that. Obviously, you would rather companies have their quality control measures in place to prevent this kind of thing from happening. But for a company as big as J&J, this really is the cost of doing business.