Stock Analysis on Net

Johnson & Johnson (NYSE:JNJ)

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Johnson & Johnson, balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 29, 2019
Operating Assets
Total assets 167,558 187,378 182,018 174,894 157,728
Less: Cash and cash equivalents 21,859 14,127 14,487 13,985 17,305
Less: Marketable securities 1,068 9,392 17,121 11,200 1,982
Operating assets 144,631 163,859 150,410 149,709 138,441
Operating Liabilities
Total liabilities 98,784 110,574 107,995 111,616 98,257
Less: Loans and notes payable 3,451 12,771 3,766 2,631 1,202
Less: Long-term debt, excluding current portion 25,881 26,888 29,985 32,635 26,494
Operating liabilities 69,452 70,915 74,244 76,350 70,561
 
Net operating assets1 75,179 92,944 76,166 73,359 67,880
Balance-sheet-based aggregate accruals2 (17,765) 16,778 2,807 5,479
Financial Ratio
Balance-sheet-based accruals ratio3 -21.13% 19.84% 3.75% 7.76%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
AbbVie Inc. -22.39% -14.27% -9.69% 131.82%
Amgen Inc. 57.08% 4.07% 0.70% 3.47%
Bristol-Myers Squibb Co. -7.12% -3.86% -13.40% -13.24%
Eli Lilly & Co. 28.84% 11.38% 16.60% 18.42%
Gilead Sciences Inc. 1.04% -2.92% -2.34% 59.36%
Merck & Co. Inc. 3.16% 0.46% 25.14% 15.90%
Pfizer Inc. 30.66% 24.95% -7.11% -14.91%
Regeneron Pharmaceuticals Inc. 1.17% 11.07% 43.54% 16.50%
Thermo Fisher Scientific Inc. 4.97% -1.78% 43.38% 1.98%
Vertex Pharmaceuticals Inc. 61.24% 14.07% 18.20% -8.97%
Balance-Sheet-Based Accruals Ratio, Sector
Pharmaceuticals, Biotechnology & Life Sciences 7.77% 5.56% 5.06% 17.61%
Balance-Sheet-Based Accruals Ratio, Industry
Health Care 8.00% 2.36% 5.50% 10.57%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29).

1 2023 Calculation
Net operating assets = Operating assets – Operating liabilities
= 144,63169,452 = 75,179

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 75,17992,944 = -17,765

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -17,765 ÷ [(75,179 + 92,944) ÷ 2] = -21.13%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Johnson & Johnson deteriorated earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

Johnson & Johnson, cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 29, 2019
Net earnings 35,153 17,941 20,878 14,714 15,119
Less: Net cash flows from operating activities 22,791 21,194 23,410 23,536 23,416
Less: Net cash (used by) from investing activities 878 (12,371) (8,683) (20,825) (6,194)
Cash-flow-statement-based aggregate accruals 11,484 9,118 6,151 12,003 (2,103)
Financial Ratio
Cash-flow-statement-based accruals ratio1 13.66% 10.78% 8.23% 17.00%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
AbbVie Inc. -24.89% -16.25% -10.28% 44.98%
Amgen Inc. 52.47% 8.81% -12.87% 6.95%
Bristol-Myers Squibb Co. -5.99% -9.10% -12.73% -15.67%
Eli Lilly & Co. 28.13% 10.32% 5.30% 11.38%
Gilead Sciences Inc. -0.19% -4.95% -4.86% 20.18%
Merck & Co. Inc. 2.23% 0.61% 29.09% 13.75%
Pfizer Inc. 19.96% 18.46% 13.18% 3.27%
Regeneron Pharmaceuticals Inc. 14.35% 18.61% 49.24% 10.32%
Thermo Fisher Scientific Inc. 3.80% -0.06% 34.69% -0.89%
Vertex Pharmaceuticals Inc. 62.03% -14.45% 1.38% -23.47%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Pharmaceuticals, Biotechnology & Life Sciences 9.84% 2.64% 7.05% 9.16%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Health Care 8.56% 2.29% 6.44% 6.57%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29).

1 2023 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 11,484 ÷ [(75,179 + 92,944) ÷ 2] = 13.66%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Johnson & Johnson deteriorated earnings quality from 2022 to 2023.