Johnson & Johnson (NYSE:JNJ) was cut to Equal Weight from Overweight at Wells Fargo on Wednesday, with the firm cutting its price target for the stock to $163 from $170 per share.
Analysts at Wells Fargo said in a note to clients that they believe the company's earnings growth over the next few years will be muted because of Stelara's loss of exclusivity (LOE).
JNJ shares are down more than 1% Wednesday at the time of writing.
"Stelara, JNJ's largest single product, is facing LOE OUS in mid-24 and in the US in early 2025," the firm explained. "We estimate Stelara accounts for ~13% of total JNJ sales and ~24% of total JNJ operating income in 2023."
Wells Fargo expects the Stelara LOE to create a headwind to EPS growth in the next few years, which they believe is partly why JNJ now expects to grow EPS commensurate with sales. Historically, JNJ targeted growing EPS faster than sales.
"We estimate 2024 underlying EPS growth closer to 3%. JNJ guided to ex-FX EPS of $10.55-$10.65 or 7.3% growth at the midpoint in 2024," the firm added. "We estimate underlying 2024 EPS growth is closer to 3% vs. 7.3%."
However, the firm expects "2025 EPS growth to remain muted." The firm said that while JNJ expects to grow 2025 sales by at least 3%, they estimate that the Stelara LOE would be a headwind to EPS growth of ~8.5% in 2025, which would "make EPS growth a challenge."