Johnson and Johnson - Johnson Johnson Analyst Opinion...

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Johnson & Johnson 11/01/2011 Analyst Opinion: Hold Buy Analyst Outlook: Positive Positive Student Analyst: Nguyen Bui 5.15% of 8/ 15/2012 5.15% of 7/15/2018 CUSIP: 478160AP9 478160AU8 Purchase Date: 10/27/2009 12/5/2008 Original Par: $10000000 $13000000 Current Book Value: $10343933.4 13640477.89 Book Price: $103.439 $104.927 Impairment: 0% 0% Coupon: 5.15% 5.15% Page 1
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Johnson & Johnson 11/01/2011 Maturity: 8/15/2012 7/15/2018 Market Price: $104.576 &115.286 52-Week Range: $103.779$--$108.819 $119.5$--$121.622 Equity Price: $62.17 (10/04/2011) 52-Week Range: $60.83 - $62.33 Symbol/Ticker: JNJ Ratings: Aaa/Neg// AAA/Stable(S&P) CDS Value: 42.82 bps. CDS Implied Default Probability: 3.65% Moody’s Default Probability: % Recovery Rating: 40% Corporate Headquarters: New Jersey, NY Recommendation: Johnson & Johnson has a positive outlook and I recommend holding this bond. Heightened Awareness Watch List: NO Impairment: NO Impairment Taken to Date: 11/1/2011 Recommended Impairment: Johnson and Johnson is a holding company that is engaged in the research and development, manufacture and sale of a range of products in the health care field. It is a multi-national manufacturers of pharmaceutical, diagnostic, therapeutic, surgical, and biotechnology products, as well as personal hygiene products. Page 2
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Johnson & Johnson 11/01/2011 Johnson & Johnson is one of the leading global pharmaceutical companies in the industry. It has a diverse revenue base, a robust research pipeline, and exceptional cash-flow generation that together create a wide economic moat. Also, JNJ’s bond ratings remained unchanged and high since its issuance which demonstrates Johnson and Johnson’s ability to maintain its business growth and stability as well as its ability to service its debt. One big negative thing about Johnson &Johnson is that cash flow has fluctuated for the last 5 years. It decreased in 2007-2008 and then went back up again in 2009 but down again in 2010. This fact has demonstrated unstable growth, and its instability in generating cash. Also, JNJ third-quarter earnings fell on lower U.S sales due to many recalls it has done for the past two years. Johnson and Johnson has also involved in various legal litigations and issues which have lowered its reputation and also affected its growth and financial stability. In the last several years, J&J has recalled hundreds of millions of bottles and packages of familiar household brands- including Tylenol and Mortrin painkillers. Many recalls have damaged J&J’s reputation and threatened to hurt its earnings in the next years. Johnson and Johnson belongs to healthcare industry where its volumes have not been affected by the downturn in the economy. J&J has also pursued steady diversification which is one of its strategies to balance its profits even in weakening economy. Johnson and Johnson’s EBITDA/Total Expense ratio of 36.9 shows that it has a strong ability to service its debt. Its debt/EBITDA ratio of .9 which is relatively low comparing to other competitors.
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