Sum-Of-The-Parts Analysis Suggests J&J Stock Price Of $124

The Board of Johnson & Johnson (NYSE: JNJ) received a letter from Artisan Partners Asset Management Inc (NYSE: APAM) urging the former company to consider separating its three divisions - Consumer, Pharmaceutical and Medical Devices - into standalone entities.

Artisan Partners, which owns around 0.2 percent of Johnson & Johnson’s common shares outstanding, also expressed concerns around value destroying M&A and the improper alignment of compensation with "real" performance.

Bernstein’s Ali Dibadj mentioned that Johnson & Johnson’s Consumer division was the smallest of the three divisions, comprising around 19 percent of total sales and about 9 percent of pre-tax profits.

“Despite underperforming the market over the past few years, JNJ's Consumer business is strategically positioned to realize above-average topline growth given its exposure to faster growing category-country combinations, which is partially a function of its increased exposure to emerging markets,” analyst Ali Dibadj wrote.

Sum-Of-The-Parts Analysis

A basic sum-of-the-parts analysis, using average multiples for each division, resulted in a stock price of $124, as compared to Johnson & Johnson’s current share price of $107, Dibadj stated. The Consumer division alone was estimated to be worth around $35 billion, or about 10 percent of the total company’s enterprise value.

The analyst believes that Procter & Gamble Co (NYSE: PG), Colgate-Palmolive Company (NYSE: CL), Edgewell Personal Care Co (NYSE: EPC) and Unilever plc (ADR) (NYSE: UL) could be “potentially interesting combinations” for Johnson & Johnson’s Consumer business.