JNJ 1Q26 Delivers Steady Growth Despite Stelara Headwind, and MedTech Readout Is Constructive

Overview

This report is Bernstein's commentary on Johnson & Johnson's 1Q26 results. It argues that the company delivered a solid quarter despite a significant headwind from Stelara decline. Revenue, organic growth, and key business segments were all slightly better than expected, and MedTech performance helped ease concerns that first-quarter surgical volumes were being hurt by weather and flu. The company modestly raised FY26 sales and EPS guidance and said it expects to reach roughly $100B in annual revenue in 2026 for the first time, while management continues to emphasize visible double-digit revenue growth by the end of the decade.

Core views

The core view is threefold: first, JNJ's near-term earnings quality is better than feared; 1Q26 organic sales grew 5.3%. Although Stelara created approximately 540 bps of full-revenue headwind and about 920 bps of pharmaceutical-segment headwind, growth was supported by assets in Oncology, Neuroscience, TREMFYA, INLEXZO, and ICOTYDE. Second, MedTech did not show a meaningful weather or flu-related surgery delay, with Cardiovascular and Orthopaedics broadly better than or in-line with expectations, despite some relative weakness in US EP from PFA competition. Third, long-term growth catalysts rely on new-drug launches, PFA, Impella ECP, OTTAVA, MONARCH, and the Orthopaedics spin-off, but the current rating remains Market-Perform, reflecting only about 5% target upside versus the current price.

Analysis framework

The report analyzes JNJ by combining earnings review, segment decomposition, management-call takeaways, consensus comparison, and valuation-multiple methods. It focuses on actual sales growth, EPS, segment growth, margin trends, FY26 guidance changes, flagship product acceleration, MedTech procedure trends, and competitive dynamics, and derives the target price using a target P/E approach.

Methodology notes

• Valuation methodstarget P/E multiple

  target P/E valuation

  Bernstein applies a 19.5x target P/E multiple to forward Q5-Q8 EPS of $12.88 and arrives at a $251 target price; this multiple was raised from 18x to 19.5x to reflect improved growth visibility.

• earnings_reviewconsensus beat/miss analysis

  Actual outcomes versus consensus expectations

  The report compares company sales, segment revenue, EPS, and flagship product sales with sell-side consensus, highlighting key deviations such as 1Q26 revenue beating by 1.7%, Innovative Medicine beating by 2.4%, and MedTech beating by 1%.

• segment_analysisbusiness segment decomposition

  Segment operating decomposition

  The report separately analyzes Innovative Medicine and MedTech, and further breaks these into Oncology, Immunology, Neuroscience, Cardiovascular, Orthopaedics, Surgery, and Vision Care to identify drivers of growth and key risks.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• JNJ.US

  Company and rating coverage

  Strengths

  Revenue growth is steady, FY26 guidance was slightly raised, and management describes the portfolio and pipeline as the strongest in the company's history; both Innovative Medicine and MedTech have several mid-to-long-term catalysts.

  Weaknesses

  Stelara decline is significant, US EP is under PFA competitive pressure, and operating margin is pressured by investments in newly launched products, tariffs, product mix, and cost pressures.

  Comparison

  The rating is Market-Perform, meaning performance is roughly aligned with benchmark expectations; the target price is only about 5% above the current price.

  Risks

  Key risks include margin pressure, supply-chain and inflation, major product recalls, FDA warning letters, pricing or reimbursement stress, policy and guideline changes, macro deterioration, and FX volatility.

• MedTech segment

  Important JNJ business segment and medical-technology sector read

  Strengths

  1Q26 growth was 4.7%, 1% ahead of expectations; Cardiovascular and Orthopaedics performed well, and weather and flu effects on procedural volume were not significant.

  Weaknesses

  US EP was relatively weak quarter-over-quarter, roughly 1% below consensus; PFA competition is intensifying; Shockwave grew 18.1% but about 4% below expectations.

  Comparison

  The report sees JNJ's result as a constructive signal for MedTech demand, while competition in PFA, IVL, and robotics still requires continued execution against peers.

  Risks

  Risks include inability to keep up with PFA competition, slower-than-expected approval or commercialization of surgical robots, heavier China VBP rounds, and execution risk around the Orthopaedics spin-off.

• Innovative Medicine segment

  Source of JNJ pharmaceutical growth

  Strengths

  1Q26 growth was 5.6%, 2.4% above expectations; TREMFYA, INLEXZO, ICOTYDE, RYBREVANT, DARZALEX, CARVYKTI, ERLEADA, and SPRAVATO support the growth.

  Weaknesses

  Global Stelara sales declined 61.7%, creating about 920 bps of pharmaceutical headwind; investments tied to new launches are pressuring margins.

  Comparison

  Management believes many assets remain underappreciated by the market, but the report's overall rating remains neutral.

  Risks

  Biosimilar competition, generic competition for Opsumit and Simponi, slower-than-expected product ramp, and reimbursement or patient access disappointment.

Key data

• 1Q26 sales$24.1bn5.3% organic growth, beating consensus by 1.7%, despite 540 bps of headwind from Stelara.
• 1Q26 adjusted EPS$2.70In line with consensus expectation of $2.69.
• FY26 adjusted operating-sales growth guidance5.6%-6.6%Previously 5.4%-6.4%, midpoint raised by about 20 bps.
• FY26 adjusted EPS guidance$11.45-$11.65Previously $11.43-$11.63, raised by $0.02.
• Innovative Medicine growth5.6%Ahead of expectations by 2.4%, but Stelara created roughly 920 bps of headwind for pharmaceutical growth.
• MedTech growth4.7%Ahead of expectation by 1%; impacts on surgical volumes from weather and flu are considered not significant.
• TREMFYA growth64%Sales were about 14% above consensus, continuing as an important growth asset in inflammatory diseases.
• Stelara global sales change-61.7%Driven by biosimilar competition, increased uptake of innovator class alternatives, and a less favorable patient mix; about 33% below consensus.
• Target price$251Raised from $225, based on a 19.5x target P/E and forward Q5-Q8 EPS of $12.88.
• Current price and implied upside$240.10 / 5%As of close on 2026-04-14.

Impact & implications

For investors, the implication is a modest improvement in JNJ's fundamental narrative: Stelara patent-cliff pressure remains meaningful, but new medicines, oncology, neuroscience, and the MedTech pipeline can partially offset it. The first-quarter MedTech read is also a constructive reference for broader medical-technology demand. Bernstein still maintains Market-Perform, however, which suggests the improved target price leaves a risk-reward profile that is more neutral; investors should monitor new-product ramp, PFA competition, robotic surgery approvals, and Orthopaedics carve-out execution.

Risks

• Continued Stelara declines and biosimilar competition may keep pressing pharmaceutical growth.
• Higher investment related to newly launched products and the Intra-Cellular acquisition may suppress near-term margins.
• Tariffs, supply-chain constraints, inflation, and MedTech cost pressures may weigh on gross margin or pre-tax profitability.
• US EP faces PFA competitive pressure, and JNJ needs to demonstrate the competitiveness of Dual Energy SMARTTOUCH SF Catheter, VARIPULSE Pro, and OMNYPULSE.
• Shockwave sales are below expectations, and new competitors in IVL could affect the growth trajectory.
• FDA warning letters, major product recalls, manufacturing disruptions, approval delays, or adverse clinical data could all be valuation negative.
• Pricing pressure, reimbursement changes, policy actions, or physician guideline changes could affect product utilization.
• Further progress on China VBP could exert greater pressure on MedTech in the second half.
• Global macro deterioration or FX swings could impact revenue and profitability.

What to watch

• The patient pull-through and sales acceleration trajectory for INLEXZO after receiving a permanent J-code.
• Post-launch prescription volume, patient access, and whether ICOTYDE can become a blockbuster after full commercial launch.
• TREMFYA's share persistence in the IL-23 and inflammatory bowel disease markets.
• The full-year revenue and profit drag from biosimilar competition to Stelara.
• Whether FY26 can achieve roughly $100B in annual revenue and if 2H26 EPS growth is stronger than management expects.
• The competitive landscape in US EP and PFA, especially progress on VARIPULSE Pro, Dual Energy THERMOCOOL SMARTTOUCH SF Catheter, and OMNYPULSE.
• Impella ECP, Abiomed evidence generation, and utilization trends in high-risk PCI and cardiogenic shock.
• Regulatory and launch milestones for OTTAVA, MONARCH, ETHIZIA, and VARIPULSE Pro in 2026.
• Whether the Orthopaedics spin-off stays on the mid-2027 timeline and the structure of the transaction.
• The impact of China VBP on MedTech second-half growth and pricing.