Johnson & Johnson (JNJ 0.54%) is a well-known consumer and healthcare company that has been in operation for more than a century. Meanwhile, Intuitive Surgical (ISRG 0.81%) has made a name for itself as the market leader in robotic surgery.
Determining which stock is a better long-term investment right now is difficult. Yet, one has the upper hand. Let us delve deeper to learn more.
NYSE: JNJ
Key Data Points
The case for Johnson & Johnson
Johnson & Johnson is wildly popular for its consumer brands, such as Band-Aids, Listerine, Neutrogena, and Tylenol. But its pharmaceutical business, which manufactures a wide array of drugs, including immunology and cancer treatments, is also thriving. Pharmaceuticals contributed 54% of the company's total revenue in its recent first quarter ended March 31.
As J&J looks to spin off its consumer segment into a new company by the end of this year to focus solely on its core business, the numbers show this would be a worthwhile shift. The pharmaceuticals segment alone generated $52.5 billion in sales in 2022. The company generated total revenue of $25 billion in the quarter, a growth of 5.6% year over year. Most of its popular drugs -- Stelara, Tremfya, Erleada, and Darzalex -- showed outstanding growth in the quarter. The company is also excited about upcoming products that include Carvykti (used to treat relapsed or refractory multiple myeloma), Spravato (used to treat depression), and Tecvayli (used to treat multiple myeloma). Not only has this segment contributed significantly to the top line, but it also has the highest profit margin.
J&J's MedTech segment also got a boost from its recent acquisition of Abiomed, a provider of cardiovascular medical technology.
The company hopes to end the year strong. It also expects to generate nearly $60 billion in pharmaceutical sales by 2025. Given its strong product pipeline, I think the target is doable.
J&J also holds the title of Dividend King, which is awarded to companies that have increased their dividend annually for at least 50 years. The company recently announced a 5.3% dividend hike, marking its 61st dividend increase. It yields 2.9%, higher than the S&P 500 's average yield of 1.7%.
NASDAQ: ISRG
Key Data Points
The case for Intuitive Surgical
Unlike J&J, medical equipment manufacturer Intuitive Surgical is not a dividend-paying stock. Despite only being in business for 28 years, the company's revenue and net income have increased dramatically in the last five years.
Its cutting-edge technology -- the da Vinci robotic system -- has helped it dominate the market for minimally invasive surgery (MIS). These machines allow surgeons to use tiny instruments with pinpoint accuracy and provide 3D high-definition views of the operating area. What's more, MIS procedures also result in faster patient recovery times.
MIS procedures are usually optional and took a hit during the pandemic. Despite the headwinds, the number of da Vinci procedures performed globally increased by 82% between 2017 and 2021, depicting the rising demand.
Intuitive's recurring revenue is even more impressive. The sale of disposable surgical instruments and accessories contributes to the company's top line. It grew by an impressive 22% year over year to $986 million in the most recent reported first quarter. Total revenue for the quarter rose by 14% to $1.7 billion from the year-ago period.
Since the end of 2017, the company's installed base of da Vinci surgical systems has grown from 4,409 to 7,779 as of March 31. And it expects the number of installed systems to continue growing.
The verdict
Both are exceptional stocks to buy right now. J&J is a solid company that is a good pick for investors looking for passive income. But if I had to pick a better growth stock, I'd go with Intuitive Surgical. The chart below clearly depicts the vast difference in growth over the past decade.
JNJ Revenue (Annual) data by YCharts
J&J has a well-established and stable business with limited room for expansion. Though its pharmaceutical division has a lot of scopes to develop more innovative drugs, Intuitive's robotics business could be the future of healthcare.
J&J has also entered the robotics market with the introduction of Ottava, the company's robot-assisted surgery system, in November 2021. The system's progress has pleased management. However, breaking Intuitive's monopoly in the robotic surgery market will be difficult. According to BIS Research, Intuitive has an 80% market share and will continue to dominate it through 2031. In this field, it already has a head start and a strong moat. Furthermore, hospitals spend a significant amount of money purchasing these systems and training surgeons to use them. For hospitals, the da Vinci systems require an initial capital investment ranging from $0.5 million to $2.5 million.
Even if a slightly cheaper product is available on the market, hospitals are unlikely to make such a large investment again. The da Vinci is a tried-and-true system. The company is also branching out from its core robotics business. In 2020, it acquired Orpheus Medical, a privately held company that provides clinical and imaging documentation solutions to hospitals.
Continued innovation in this field will only increase the number of opportunities available to Intuitive, which is already an expert. By 2031, the global robotics market is expected to grow at a compound annual rate of 10%, reaching $17 billion. Intuitive is also financially strong enough to create more innovative products. As a result, I prefer Intuitive Surgical over J&J.
