Analysis of Investments
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Johnson & Johnson pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Total Asset Turnover since 2005
- Analysis of Revenues
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Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Johnson & Johnson, adjustment to net earnings
US$ in millions
| 12 months ended: | Dec 28, 2025 | Dec 29, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net earnings (as reported) | ||||||
| Add: Securities, net change | ||||||
| Net earnings (adjusted) |
Based on: 10-K (reporting date: 2025-12-28), 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
Reported net earnings exhibited volatility over the five-year period, fluctuating between approximately US$14 billion and US$35 billion. A significant decrease was observed from 2021 to 2022, followed by a substantial increase in 2023, a decline in 2024, and a subsequent rise in 2025. Adjusted net earnings mirrored this pattern, remaining consistently close to the reported figures.
- Adjustment Magnitude
- The difference between reported and adjusted net earnings remained relatively small throughout the period. The adjustment, stemming from mark-to-market changes in available-for-sale securities, ranged from US$3 million to US$26 million. This suggests that fluctuations in the fair value of these securities had a limited impact on overall net earnings.
In 2021, the adjustment to net earnings was a reduction of US$4 million. In 2022, the adjustment was a reduction of US$24 million. The year 2023 saw an increase of US$26 million to adjusted net earnings. The adjustment in 2024 was a minor increase of US$2 million, and in 2025, a reduction of US$1 million was noted. The consistency in the small magnitude of these adjustments indicates a generally stable portfolio of available-for-sale securities, with limited volatility impacting net income.
- Trend Analysis
- While the adjustments themselves were small, the direction of the adjustment varied year to year. The 2023 adjustment suggests positive changes in the fair value of available-for-sale securities, while adjustments in 2022, 2024, and 2025 indicate negative changes. However, the overall impact on net earnings remained minimal in all instances.
The close alignment between reported and adjusted net earnings suggests that mark-to-market adjustments for available-for-sale securities do not represent a material risk or opportunity for the entity. The fluctuations observed in both reported and adjusted earnings are likely driven by core operational performance rather than investment portfolio dynamics.
Adjusted Profitability Ratios: Mark to Market Available-for-sale Securities (Summary)
Johnson & Johnson, adjusted profitability ratios
Based on: 10-K (reporting date: 2025-12-28), 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The reported and adjusted profitability ratios demonstrate significant fluctuations over the five-year period. Notably, the adjusted ratios remain nearly identical to the reported ratios across all years, suggesting that mark-to-market adjustments for available-for-sale securities have a minimal impact on the overall profitability picture. A substantial increase in profitability metrics is observed in 2023, followed by a decline in 2024, and a partial recovery in 2025.
- Net Profit Margin
- Both the reported and adjusted net profit margins experienced a decrease from 22.26% in 2021 to 18.90% in 2022. A considerable surge occurred in 2023, reaching 41.28%, before declining sharply to 15.84% in 2024. The margin then partially recovered to 28.46% in 2025, though remaining below the 2021 level. This volatility suggests potential impacts from one-time events or significant changes in operational performance.
- Return on Equity (ROE)
- Similar to the net profit margin, ROE decreased from 28.20% in 2021 to 23.36% in 2022. The year 2023 saw a dramatic increase to 51.11%, followed by a substantial decrease to 19.68% in 2024. ROE then increased to 32.87% in 2025. The parallel movement of ROE with net profit margin indicates a strong correlation between profitability and equity utilization.
- Return on Assets (ROA)
- ROA followed a comparable pattern, declining from 11.47% in 2021 to 9.57% in 2022. A significant increase to 20.98% was recorded in 2023, followed by a decline to 7.81% in 2024. ROA then rose to 13.46% in 2025. The fluctuations in ROA mirror those of the other ratios, suggesting that changes in asset efficiency contribute to the overall profitability trends.
The consistency between reported and adjusted values across all ratios indicates that the mark-to-market adjustments of available-for-sale securities do not materially alter the assessment of profitability. The pronounced changes observed in 2023 and 2024 warrant further investigation to determine the underlying drivers of these shifts in financial performance.
Johnson & Johnson, Profitability Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (reporting date: 2025-12-28), 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2025 Calculations
1 Net profit margin = 100 × Net earnings ÷ Sales to customers
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Sales to customers
= 100 × ÷ =
The financial performance, as indicated by net profit margins, exhibits considerable fluctuation over the observed period. Reported and adjusted net earnings show differing absolute values in each year, though the corresponding net profit margins remain nearly identical. A significant increase in profitability is noted between 2022 and 2023, followed by a substantial decline in 2024, and a partial recovery in 2025.
- Reported Net Profit Margin
- The reported net profit margin decreased from 22.26% in 2021 to 18.90% in 2022, representing a contraction in profitability. A dramatic increase occurred in 2023, reaching 41.28%, indicating a substantial improvement in earnings relative to revenue. This was followed by a sharp decrease to 15.84% in 2024. The margin then partially recovered to 28.46% in 2025, though remaining below the 2021 level.
- Adjusted Net Profit Margin
- The adjusted net profit margin mirrors the trend of the reported net profit margin closely. It declined from 22.26% in 2021 to 18.87% in 2022. The margin then rose significantly to 41.31% in 2023, before falling to 15.84% in 2024. A subsequent increase to 28.46% was observed in 2025. The consistency between reported and adjusted margins suggests that adjustments are not materially impacting the overall profitability picture.
- Overall Trend
- A cyclical pattern appears to be present. The period begins with a relatively high margin, experiences a decline, a substantial surge, a significant drop, and then a partial recovery. The volatility observed, particularly between 2023 and 2024, warrants further investigation to understand the underlying drivers of these fluctuations. The return to a margin of 28.46% in 2025 suggests a stabilization, but continued monitoring is recommended.
Adjusted Return on Equity (ROE)
Based on: 10-K (reporting date: 2025-12-28), 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2025 Calculations
1 ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net earnings ÷ Shareholders’ equity
= 100 × ÷ =
The period under review demonstrates fluctuations in reported and adjusted net earnings, which correspondingly impact reported and adjusted return on equity (ROE). While reported and adjusted net earnings exhibit differing absolute values across the years, the reported and adjusted ROE values remain nearly identical each year, suggesting consistency in the adjustments made.
- Net Earnings Trend
- Reported net earnings decreased from US$20,878 million in 2021 to US$17,941 million in 2022. A substantial increase was then observed in 2023, reaching US$35,153 million, followed by a significant decline to US$14,066 million in 2024. A partial recovery is indicated in 2025, with reported net earnings rising to US$26,804 million. Adjusted net earnings follow a similar pattern, remaining very close to the reported figures.
- Return on Equity (ROE) – Reported
- Reported ROE mirrored the trend in net earnings. It decreased from 28.20% in 2021 to 23.36% in 2022, then increased sharply to 51.11% in 2023. A substantial decrease occurred in 2024, with ROE falling to 19.68%, before recovering to 32.87% in 2025.
- Return on Equity (ROE) – Adjusted
- Adjusted ROE exhibited an identical pattern to reported ROE across all years. The values are consistently within 0.04% of the reported ROE, indicating that the adjustments applied to net earnings do not materially alter the overall return on equity calculation. The adjusted ROE followed the same trajectory: 28.20% (2021), 23.33% (2022), 51.15% (2023), 19.68% (2024), and 32.87% (2025).
The significant volatility in both net earnings and ROE suggests the presence of substantial underlying business factors influencing performance. The consistency between reported and adjusted ROE implies that the adjustments are not masking significant discrepancies in profitability.
Adjusted Return on Assets (ROA)
Based on: 10-K (reporting date: 2025-12-28), 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2025 Calculations
1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × ÷ =
The period under review demonstrates fluctuations in reported and adjusted net earnings, which correspondingly impact reported and adjusted return on assets. A significant increase in both reported and adjusted net earnings is observed between 2022 and 2023, followed by a substantial decrease in 2024, and a partial recovery in 2025. These earnings variations directly influence the observed trends in both ROA metrics.
- Reported Net Earnings
- Reported net earnings decreased from US$20,878 million in 2021 to US$17,941 million in 2022, representing a decline of approximately 13.9%. A considerable increase is then noted in 2023, reaching US$35,153 million. However, this was followed by a significant drop to US$14,066 million in 2024. A partial recovery to US$26,804 million is evident in 2025, though remaining below the 2021 and 2023 levels.
- Adjusted Net Earnings
- Adjusted net earnings follow a similar pattern to reported net earnings. A decrease from US$20,874 million in 2021 to US$17,917 million in 2022 is observed, followed by a substantial increase to US$35,179 million in 2023. A marked decline to US$14,068 million occurs in 2024, with a subsequent recovery to US$26,803 million in 2025. The differences between reported and adjusted net earnings are consistently minimal throughout the period.
- Reported Return on Assets (ROA)
- Reported ROA mirrors the earnings trend. It decreased from 11.47% in 2021 to 9.57% in 2022. A significant increase to 20.98% is then recorded in 2023, coinciding with the peak in reported net earnings. A substantial decrease to 7.81% is observed in 2024, followed by a partial recovery to 13.46% in 2025.
- Adjusted Return on Assets (ROA)
- Adjusted ROA exhibits a pattern nearly identical to the reported ROA. It decreased from 11.47% in 2021 to 9.56% in 2022, increased to 21.00% in 2023, decreased to 7.81% in 2024, and recovered to 13.45% in 2025. The values for adjusted ROA are consistently within 0.01% of the reported ROA values for each year.
The close alignment between reported and adjusted ROA suggests that adjustments to net earnings have a limited impact on the overall ROA calculation. The substantial fluctuations in ROA are primarily driven by the corresponding changes in net earnings. The decrease in 2024 warrants further investigation to understand the underlying factors contributing to the reduced profitability.