What happened
Shares of healthcare-behemoth Johnson & Johnson (JNJ +0.64%) were down by 2.46% on heavy volume as of 2:23 p.m. ET Tuesday afternoon. The company's shares are slumping today despite its release of better-than-expected 2023 first-quarter earnings ahead of the opening bell.
Specifically, J&J's Q1 non-GAAP earnings exceeded Wall Street's consensus figure by a healthy 7.2%. What's more, the healthcare-titan's top line beat expectations by a handsome 4.6%, fueled by strong sales of the multiple myeloma biologic Darzalex, the anti-inflammatory medicine Stelara, and its COVID-19 vaccine.
So what
Why are investors hitting the exits today? Unfortunately, J&J's management also admitted today that its high-dollar talcum-powder litigation may not be over quite yet.
Earlier this month, J&J's stock perked up in response to a proposed $8.9 billion settlement with tens of thousands of litigants over the matter. As a part of this proposed settlment, the healthcare company booked a $6.9 billion charge in the first quarter, resulting in a net loss of $68 million for the three-month period.
NYSE: JNJ
Key Data Points
Nonetheless, J&J's Chief Financial Officer Joseph Wolk said in today's accompanying conference call that a small number of plaintiff attorneys won't give their claimants the right to vote on the matter. This development doesn't mean that J&J's proposed settlement won't ultimately go through, but it does add another unwanted (by investors) wrinkle to the case.
Now what
Is J&J's stock a buy on this weakness? The upcoming spinoff of its consumer healthcare unit ought to unlock tremendous value for shareholders, thanks to the stellar growth potential of the company's pharmaceutical and medtech businesses. As such, bargain hunters may want to take advantage of today's modest pullback.
