Stock Analysis on Net

Johnson & Johnson (NYSE:JNJ)

Economic Value Added (EVA)

Microsoft Excel

Economic Profit

Johnson & Johnson, economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 29, 2019
Net operating profit after taxes (NOPAT)1 8,905 16,089 18,854 13,700 12,552
Cost of capital2 8.86% 8.78% 8.79% 8.73% 8.85%
Invested capital3 99,118 113,927 98,203 98,488 96,969
 
Economic profit4 120 6,088 10,224 5,106 3,969

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 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 8,9058.86% × 99,118 = 120

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Johnson & Johnson economic profit decreased from 2021 to 2022 and from 2022 to 2023.

Net Operating Profit after Taxes (NOPAT)

Johnson & Johnson, NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: 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
Deferred income tax expense (benefit)1 (4,059) (1,663) (2,079) (1,141) (2,476)
Increase (decrease) in allowances for doubtful accounts2 (3) (27) (63) 67 (22)
Increase (decrease) in restructuring reserve3 (28) (7) (36) (62)
Increase (decrease) in equity equivalents4 (4,062) (1,718) (2,149) (1,110) (2,560)
Interest expense, net of portion capitalized 772 276 183 201 318
Interest expense, operating lease liability5 35 44 28 31 30
Adjusted interest expense, net of portion capitalized 807 320 211 232 348
Tax benefit of interest expense, net of portion capitalized6 (169) (67) (44) (49) (73)
Adjusted interest expense, net of portion capitalized, after taxes7 637 253 166 184 275
Interest income (1,261) (490) (53) (111) (357)
Investment income, before taxes (1,261) (490) (53) (111) (357)
Tax expense (benefit) of investment income8 265 103 11 23 75
Investment income, after taxes9 (996) (387) (42) (88) (282)
(Income) loss from discontinued operations, net of tax10 (21,827)
Net operating profit after taxes (NOPAT) 8,905 16,089 18,854 13,700 12,552

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 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances for doubtful accounts.

3 Addition of increase (decrease) in restructuring reserve.

4 Addition of increase (decrease) in equity equivalents to net earnings.

5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,100 × 3.14% = 35

6 2023 Calculation
Tax benefit of interest expense, net of portion capitalized = Adjusted interest expense, net of portion capitalized × Statutory income tax rate
= 807 × 21.00% = 169

7 Addition of after taxes interest expense to net earnings.

8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 1,261 × 21.00% = 265

9 Elimination of after taxes investment income.

10 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Johnson & Johnson NOPAT decreased from 2021 to 2022 and from 2022 to 2023.

Cash Operating Taxes

Johnson & Johnson, cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 29, 2019
Provision for taxes on income 1,736 3,784 1,898 1,783 2,209
Less: Deferred income tax expense (benefit) (4,059) (1,663) (2,079) (1,141) (2,476)
Add: Tax savings from interest expense, net of portion capitalized 169 67 44 49 73
Less: Tax imposed on investment income 265 103 11 23 75
Cash operating taxes 5,700 5,411 4,010 2,949 4,683

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).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Johnson & Johnson cash operating taxes increased from 2021 to 2022 and from 2022 to 2023.

Invested Capital

Johnson & Johnson, invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 29, 2019
Loans and notes payable 3,451 12,771 3,766 2,631 1,202
Long-term debt, excluding current portion 25,881 26,888 29,985 32,635 26,494
Operating lease liability1 1,100 1,300 1,000 1,100 985
Total reported debt & leases 30,432 40,959 34,751 36,366 28,681
Shareholders’ equity 68,774 76,804 74,023 63,278 59,471
Net deferred tax (assets) liabilities2 (6,086) (2,749) (2,736) (1,319) (1,861)
Allowances for doubtful accounts3 166 203 230 293 226
Restructuring reserve4 109 137 144 180
Equity equivalents5 (5,920) (2,437) (2,369) (882) (1,455)
Accumulated other comprehensive (income) loss, net of tax6 12,527 12,967 13,058 15,242 15,891
Adjusted shareholders’ equity 75,381 87,334 84,712 77,638 73,907
Construction in progress7 (5,627) (4,974) (4,139) (4,316) (3,637)
Current marketable securities8 (1,068) (9,392) (17,121) (11,200) (1,982)
Invested capital 99,118 113,927 98,203 98,488 96,969

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 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of restructuring reserve.

5 Addition of equity equivalents to shareholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in progress.

8 Subtraction of current marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Johnson & Johnson invested capital increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

Cost of Capital

Johnson & Johnson, cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 377,093 377,093 ÷ 406,525 = 0.93 0.93 × 9.36% = 8.68%
Borrowings3 28,332 28,332 ÷ 406,525 = 0.07 0.07 × 3.14% × (1 – 21.00%) = 0.17%
Operating lease liability4 1,100 1,100 ÷ 406,525 = 0.00 0.00 × 3.14% × (1 – 21.00%) = 0.01%
Total: 406,525 1.00 8.86%

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 412,102 412,102 ÷ 451,461 = 0.91 0.91 × 9.36% = 8.55%
Borrowings3 38,059 38,059 ÷ 451,461 = 0.08 0.08 × 3.38% × (1 – 21.00%) = 0.23%
Operating lease liability4 1,300 1,300 ÷ 451,461 = 0.00 0.00 × 3.38% × (1 – 21.00%) = 0.01%
Total: 451,461 1.00 8.78%

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 436,958 436,958 ÷ 474,909 = 0.92 0.92 × 9.36% = 8.61%
Borrowings3 36,951 36,951 ÷ 474,909 = 0.08 0.08 × 2.76% × (1 – 21.00%) = 0.17%
Operating lease liability4 1,000 1,000 ÷ 474,909 = 0.00 0.00 × 2.76% × (1 – 21.00%) = 0.00%
Total: 474,909 1.00 8.79%

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 425,504 425,504 ÷ 467,270 = 0.91 0.91 × 9.36% = 8.52%
Borrowings3 40,666 40,666 ÷ 467,270 = 0.09 0.09 × 2.85% × (1 – 21.00%) = 0.20%
Operating lease liability4 1,100 1,100 ÷ 467,270 = 0.00 0.00 × 2.85% × (1 – 21.00%) = 0.01%
Total: 467,270 1.00 8.73%

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 392,942 392,942 ÷ 424,623 = 0.93 0.93 × 9.36% = 8.66%
Borrowings3 30,696 30,696 ÷ 424,623 = 0.07 0.07 × 3.19% × (1 – 21.00%) = 0.18%
Operating lease liability4 985 985 ÷ 424,623 = 0.00 0.00 × 3.00% × (1 – 21.00%) = 0.01%
Total: 424,623 1.00 8.85%

Based on: 10-K (reporting date: 2019-12-29).

1 US$ in millions

2 Equity. See details »

3 Borrowings. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Johnson & Johnson, economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 29, 2019
Selected Financial Data (US$ in millions)
Economic profit1 120 6,088 10,224 5,106 3,969
Invested capital2 99,118 113,927 98,203 98,488 96,969
Performance Ratio
Economic spread ratio3 0.12% 5.34% 10.41% 5.18% 4.09%
Benchmarks
Economic Spread Ratio, Competitors4
AbbVie Inc. -3.90% 5.52% 4.90% -2.96% 7.31%
Amgen Inc. 2.83% 7.51% 7.49% 11.81% 14.02%
Bristol-Myers Squibb Co. 2.11% -0.57% 1.67% -13.91% -3.57%
Eli Lilly & Co. 3.40% 10.73% 12.42% 19.08% 15.91%
Gilead Sciences Inc. 6.10% 2.60% 9.11% -3.95% 7.37%
Merck & Co. Inc. -8.37% 11.82% 11.94% 4.78% 11.37%
Pfizer Inc. -8.85% 18.75% 11.90% -2.82% 5.79%
Regeneron Pharmaceuticals Inc. 21.32% 24.43% 67.43% 39.30% 28.56%
Thermo Fisher Scientific Inc. -4.53% -2.75% -0.92% 0.08% -3.81%
Vertex Pharmaceuticals Inc. 12.21% 14.96% 16.16% 29.43% 19.84%

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 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 120 ÷ 99,118 = 0.12%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Johnson & Johnson economic spread ratio deteriorated from 2021 to 2022 and from 2022 to 2023.

Economic Profit Margin

Johnson & Johnson, economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 29, 2019
Selected Financial Data (US$ in millions)
Economic profit1 120 6,088 10,224 5,106 3,969
Sales to customers 85,159 94,943 93,775 82,584 82,059
Performance Ratio
Economic profit margin2 0.14% 6.41% 10.90% 6.18% 4.84%
Benchmarks
Economic Profit Margin, Competitors3
AbbVie Inc. -4.89% 7.81% 8.36% -6.71% 13.79%
Amgen Inc. 7.37% 12.03% 12.41% 18.90% 23.61%
Bristol-Myers Squibb Co. 3.17% -0.89% 2.90% -29.48% -13.71%
Eli Lilly & Co. 2.93% 9.14% 11.47% 19.10% 15.32%
Gilead Sciences Inc. 10.38% 4.39% 16.12% -8.16% 10.48%
Merck & Co. Inc. -9.74% 14.74% 17.34% 5.69% 13.02%
Pfizer Inc. -23.43% 20.69% 12.83% -6.99% 13.53%
Regeneron Pharmaceuticals Inc. 19.44% 24.60% 45.60% 38.29% 23.71%
Thermo Fisher Scientific Inc. -9.05% -5.08% -1.89% 0.15% -7.85%
Vertex Pharmaceuticals Inc. 16.39% 22.07% 20.03% 38.63% 23.21%

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 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales to customers
= 100 × 120 ÷ 85,159 = 0.14%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Johnson & Johnson economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023.