JNJ stock slips 6% despite Q3 earnings beat, MedTech misses

Johnson & Johnson shares (JNJ) initially dropped nearly 6% on Oct. 13 following the release of third-quarter 2026 results. Although the company exceeded Wall Street estimates on both top and bottom lines, the stock's immediate decline was driven primarily by the MedTech segment falling short of expectations.

The stock has since recovered, rising 2.1% in the days following the announcement. Management cited ongoing geopolitical headwinds, including the Middle East conflict and pricing pressure in China, as factors that may keep investors cautious at current levels. Despite this caution, JNJ modestly raised its full-year 2026 revenue and earnings guidance. The shares have surged 22.4% year to date, outpacing the S&P 500's 12.1% gain.

In the third quarter, JNJ reported adjusted earnings per share of $2.59, beating the Zacks Consensus Estimate by 2.4%. Sales missed the consensus mark by a small margin. Year-over-year profits deteriorated due to expenses related to the Firefly Bio transaction and a collaboration with Sail Biomedicines.

Within the Immunology division, TREMFYA sales grew 68%, driven by momentum from its inflammatory bowel disease launch and share gains in ulcerative colitis and Crohn's disease. Conversely, STELARA sales declined 54% due to competitive pressures from biosimilars and a shift toward novel drug classes. More than 20,000 patients have initiated therapy with ICOTYDE, JNJ's first-in-class targeted oral peptide for plaque psoriasis, through nearly 9,000 prescribers since its U.S. launch.

CAPLYTA generated $1 billion in year-to-date sales, becoming JNJ's 29th billion-dollar platform. The company stated that CAPLYTA is now the fastest-growing oral branded therapy for major depressive disorder as an adjunctive treatment.

The MedTech business delivered 2.5% year-over-year sales growth, driven by electrophysiology products, Shockwave in Cardiovascular, contact lenses in Vision, and trauma products in Orthopaedics. In oncology, DARZALEX grew 15.6% on strong share gains across all lines of therapy, while TALVEY grew 42.1% due to increased depth of prescribing in community settings.

JNJ expects to receive U.S. FDA approval for RYBREVANT FASPRO, a subcutaneous medication for advanced head and neck cancer, by the end of 2026. The company remains on track to exceed $100 billion in annual revenues for the first time in its history.

Bernstein raised its price target on JNJ to $270 from $261 while maintaining a Market Perform rating. RBC Capital lowered its price target from $290 to $280 but maintained an Outperform rating.

Healthcare exchange-traded funds with significant JNJ exposure offer a diversified approach to the sector. The iShares U.S. Pharmaceuticals ETF (IHE) holds a 21.70% stake in JNJ and has rallied 18.6% year to date. The State Street Health Care Select Sector SPDR ETF (XLV) holds a 9.60% stake and has risen 13.5%. The Vanguard Health Care ETF (VHT) holds an 8.78% stake and has risen 4.2% year to date.