Johnson & Johnson (NYSE:JNJ)

The financial metrics presented demonstrate varied trends over the five-year period. While some ratios remain consistent between reported and adjusted values, notable differences emerge in profitability and asset utilization, suggesting the impact of certain adjustments. Generally, a slight deterioration in asset efficiency and increasing leverage is observed, alongside fluctuating profitability metrics.

Asset Turnover

Reported total asset turnover exhibits a consistent, albeit gradual, decline from 0.52 in 2021 to 0.47 in 2025. The adjusted total asset turnover mirrors this trend, starting at 0.55 and decreasing to 0.49 over the same period. This indicates a decreasing efficiency in generating sales from assets, even after adjustments are considered.

Liquidity

The reported and adjusted current ratios remain identical across all periods, initially decreasing from 1.35 in 2021 to 0.99 in 2022, then stabilizing around 1.1 before declining to 1.03 in 2025. This suggests a consistent liquidity position, though a slight weakening is apparent towards the end of the period.

Leverage

Both reported and adjusted debt to equity ratios show an increase over the period, with the reported ratio moving from 0.46 to 0.59 and the adjusted ratio from 0.49 to 0.60. A similar upward trend is observed in debt to capital, increasing from 0.31 to 0.37 (reported) and 0.33 to 0.38 (adjusted). This indicates a growing reliance on debt financing. Financial leverage also shows an initial increase from 2.46 to 2.52, before decreasing to 2.44 in 2025, with the adjusted value showing a more pronounced increase to 2.67 in 2024 before a subsequent decline.

Profitability

Reported net profit margin experiences significant fluctuations, peaking at 41.28% in 2023 before falling to 28.46% in 2025. The adjusted net profit margin demonstrates a different pattern, with a decline from 22.31% to 17.21% in 2022, a substantial drop to 5.31% in 2023, and a recovery to 26.72% in 2025. These discrepancies between reported and adjusted values suggest that certain adjustments significantly impact reported earnings. Return on equity (ROE) mirrors the net profit margin trends, with reported ROE at 51.11% in 2023 and adjusted ROE at 7.20% in the same year. Return on assets (ROA) also exhibits volatility, with the adjusted value declining significantly in 2023 to 2.85% before recovering to 13.07% in 2025, contrasting with the reported ROA trend.

In summary, the analysis reveals a trend of increasing financial leverage coupled with fluctuating profitability. The differences between reported and adjusted ratios, particularly in net profit margin, ROE, and ROA, highlight the importance of understanding the nature of the adjustments being made. The declining asset turnover suggests a potential need to improve asset utilization efficiency.

The period between December 31, 2021, and December 29, 2024, demonstrates a fluctuating pattern in sales to customers, initially increasing before experiencing a decline and subsequent recovery. Total assets exhibited a similar trend, with an initial rise followed by a decrease and then an increase. However, the adjusted total asset turnover presents a more nuanced picture of the company’s efficiency in utilizing its assets to generate sales.

Sales to Customers

Sales to customers increased from US$93,775 million in 2021 to US$94,943 million in 2022, representing a modest growth rate. A decrease was then observed in 2023, with sales falling to US$85,159 million. Sales partially recovered in 2024 to US$88,821 million, and continued to rise in 2025, reaching US$94,193 million, surpassing the 2021 level.

Total Assets

Total assets increased from US$182,018 million in 2021 to US$187,378 million in 2022. A subsequent decline occurred in 2023, with total assets decreasing to US$167,558 million. The trend reversed in 2024, with assets rising to US$180,104 million, and continued upward in 2025, reaching US$199,210 million.

Reported Total Asset Turnover

The reported total asset turnover ratio remained relatively stable between 2021 and 2023, fluctuating around 0.51 to 0.52. A slight downward trend was observed in 2024, with the ratio decreasing to 0.49, and this decline continued in 2025, falling to 0.47. This indicates a decreasing efficiency in generating sales relative to the company’s total assets when considering reported figures.

Adjusted Total Assets

Adjusted total assets mirrored the trend of total assets, increasing from US$172,025 million in 2021 to US$178,458 million in 2022, decreasing to US$158,445 million in 2023, and then increasing to US$169,810 million in 2024 and US$192,519 million in 2025.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio began at 0.55 in 2021, then decreased to 0.53 in 2022. It experienced a slight recovery to 0.54 in 2023, followed by a decrease to 0.52 in 2024. A further decline was observed in 2025, with the ratio falling to 0.49. While the adjusted ratio consistently exceeds the reported ratio, the observed downward trend in 2024 and 2025 suggests a diminishing ability to generate sales per dollar of adjusted assets. The difference between the reported and adjusted ratios indicates that the adjustments to total assets have a positive impact on the turnover calculation.

In summary, while sales demonstrated resilience with a return to growth by 2025, the asset turnover ratios, both reported and adjusted, indicate a decreasing trend in asset utilization efficiency over the latter part of the analyzed period. Further investigation into the nature of the asset adjustments and the factors influencing sales would be beneficial.

The reported and adjusted current ratios exhibit a similar pattern over the five-year period. Initially, the ratios remain stable, then experience a slight decline. A review of the underlying components reveals some nuances in the company’s short-term liquidity position.

Current Ratio Trend

The reported current ratio begins at 1.35 in 2021, decreases to 0.99 in 2022, then recovers to 1.16 in 2023. A further slight decrease to 1.11 is observed in 2024, followed by a decline to 1.03 in 2025. The adjusted current ratio mirrors this trend exactly.

Current Assets

Current assets decreased from US$60,979 million in 2021 to US$55,294 million in 2022, representing a notable reduction. A further decrease to US$53,495 million occurred in 2023. Subsequently, current assets increased to US$55,893 million in 2024 and remained relatively stable at US$55,624 million in 2025.

Current Liabilities

Current liabilities increased significantly from US$45,226 million in 2021 to US$55,802 million in 2022. They then decreased to US$46,282 million in 2023. A subsequent increase to US$50,321 million is noted in 2024, followed by a further increase to US$54,126 million in 2025.

Ratio Concordance

The reported and adjusted current ratios are identical across all periods. This suggests that the adjustments made to current assets do not materially impact the overall assessment of short-term liquidity. The consistency between the reported and adjusted figures indicates that the adjustments are likely related to timing differences or classifications that do not fundamentally alter the company’s ability to meet its short-term obligations.

The decline in the current ratio from 2021 to 2022 is primarily driven by an increase in current liabilities exceeding the decrease in current assets. The subsequent recovery in 2023 is attributable to a larger decrease in current liabilities than the decrease in current assets. The continued increase in current liabilities in 2024 and 2025, coupled with relatively stable current assets, contributes to the observed downward trend in the ratio during those periods.

The adjusted debt to equity ratio exhibits an increasing trend over the five-year period. Total debt fluctuates, initially increasing from 2021 to 2022, then decreasing in 2023, followed by increases in both 2024 and 2025. Shareholders’ equity demonstrates a more consistent, albeit moderate, growth pattern throughout the period, with a slight dip observed in 2023.

Adjusted Debt to Equity Ratio - Overall Trend

The adjusted debt to equity ratio increased from 0.49 in 2021 to 0.60 in 2025. This indicates a growing reliance on debt financing relative to equity financing. The most significant increase occurred between 2023 and 2025, rising from 0.48 to 0.60.

Adjusted Debt to Equity Ratio - Year-over-Year Changes

From 2021 to 2022, the ratio increased from 0.49 to 0.55, reflecting a larger proportional increase in adjusted total debt compared to adjusted shareholders’ equity. A slight decrease was observed from 2022 to 2023, with the ratio moving to 0.48, likely due to a more substantial decrease in adjusted total debt. The ratio then increased notably from 2023 to 2024 (0.48 to 0.59) and continued to rise from 2024 to 2025 (0.59 to 0.60).

Debt and Equity Components

Adjusted total debt increased from US$34,751 million in 2021 to US$49,333 million in 2025. Adjusted shareholders’ equity also increased, but at a slower pace, moving from US$71,517 million in 2021 to US$81,644 million in 2025. The comparatively faster growth of debt contributes to the increasing debt to equity ratio.

The consistent growth in the adjusted debt to equity ratio suggests a potential shift in the company’s capital structure towards greater financial leverage. While not inherently negative, this trend warrants further investigation to assess the associated risks and benefits, including the impact on financial flexibility and profitability.

The reported and adjusted debt to capital ratios exhibit generally increasing trends over the observed five-year period. While both metrics move in similar directions, the adjusted ratios consistently present a slightly higher leverage profile than those reported. Total debt fluctuates, decreasing in 2023 before increasing in subsequent years, while total capital generally increases throughout the period.

Reported Debt to Capital

The reported debt to capital ratio increased from 0.31 in 2021 to 0.34 in 2022, remained stable in 2023, and then increased again to 0.34 in 2024. A further increase to 0.37 is observed in 2025. This indicates a gradual increase in the proportion of debt financing relative to total capital.

Adjusted Debt to Capital

The adjusted debt to capital ratio shows a similar pattern, beginning at 0.33 in 2021 and rising to 0.36 in 2022. It experienced a slight decrease to 0.33 in 2023, followed by increases to 0.37 in 2024 and 0.38 in 2025. The adjusted ratio consistently exceeds the reported ratio, suggesting that the adjustments made to total debt and capital result in a higher assessed leverage.

Total Debt

Total debt increased from US$33,751 million in 2021 to US$39,659 million in 2022. A notable decrease occurred in 2023, with total debt falling to US$29,332 million. However, debt levels then rose again, reaching US$36,634 million in 2024 and US$47,933 million in 2025. This pattern suggests potential strategic debt issuance and repayment activities.

Total Capital

Total capital generally increased throughout the period, moving from US$107,774 million in 2021 to US$116,463 million in 2022. A decrease to US$98,106 million occurred in 2023, but capital levels recovered to US$108,124 million in 2024 and continued to rise to US$129,477 million in 2025. The growth in total capital indicates an expansion of the company’s funding base.

The consistent difference between reported and adjusted ratios warrants further investigation into the nature of the adjustments being made to total debt and total capital. The increasing trend in both reported and adjusted debt to capital ratios suggests a growing reliance on debt financing, which could impact future financial flexibility and risk profile.

An examination of the financial information reveals trends in adjusted financial leverage over a five-year period. Total assets experienced fluctuations, decreasing from 2021 to 2023 before increasing in both 2024 and 2025. Shareholders’ equity followed a similar pattern, with a decline through 2023 and subsequent growth in the later years. Reported financial leverage remained relatively stable between 2021 and 2023, then increased in 2024 before decreasing slightly in 2025. The adjusted figures demonstrate a slightly different dynamic, particularly in the later years.

Adjusted Financial Leverage – Overall Trend

Adjusted financial leverage exhibited a generally stable profile from 2021 to 2023, holding around 2.4. A notable increase occurred in 2024, reaching 2.67, before decreasing to 2.36 in 2025. This suggests a period of increased reliance on debt or decreased equity contribution in 2024, followed by a partial correction in 2025.

Adjusted Assets and Equity

Adjusted total assets mirrored the trend of reported total assets, decreasing from 2021 to 2023 and then increasing in 2024 and 2025. Adjusted shareholders’ equity also followed this pattern. The convergence of these trends suggests that the adjustments applied to both asset and equity values are consistently impacting the overall financial structure.

Comparison of Reported and Adjusted Leverage

While reported financial leverage remained relatively consistent from 2021 to 2023, the adjusted financial leverage showed a slight downward trend during the same period. The divergence between the two metrics became more pronounced in 2024 and 2025, with adjusted leverage experiencing a larger increase and subsequent decrease than reported leverage. This indicates that the adjustments are having a more significant impact on the leverage ratio in the later years of the period.

The decrease in adjusted financial leverage in 2025, coupled with the growth in both adjusted total assets and adjusted shareholders’ equity, may indicate strengthening financial health. However, the peak in adjusted leverage in 2024 warrants further investigation to understand the underlying drivers of this increase.

The adjusted net profit margin exhibited considerable fluctuation over the five-year period. Initial values were relatively stable before a significant decline and subsequent recovery. A detailed examination of the trends is presented below.

Overall Trend

The adjusted net profit margin began at 22.31% in 2021, decreased to 17.21% in 2022, experienced a substantial drop to 5.31% in 2023, and then increased to 14.26% in 2024. The most recent year, 2025, shows a further increase to 26.72%. This indicates a period of volatility followed by a return towards initial levels.

Year-over-Year Changes

From 2021 to 2022, the adjusted net profit margin decreased by 5.10 percentage points. The largest year-over-year change occurred between 2022 and 2023, with a decrease of 11.90 percentage points. A substantial increase of 8.95 percentage points was observed from 2023 to 2024, and a further increase of 12.46 percentage points occurred between 2024 and 2025.

Relationship to Net Earnings and Sales

The decline in adjusted net profit margin in 2022 and particularly in 2023 coincided with fluctuations in both adjusted net earnings and sales to customers. While sales remained relatively stable between 2021 and 2022, they decreased in 2023 before partially recovering in 2024 and increasing in 2025. The significant drop in adjusted net profit margin in 2023 appears to be linked to a disproportionate decrease in adjusted net earnings relative to the decline in sales. The subsequent recovery in 2024 and 2025 is associated with increases in both adjusted net earnings and sales.

Comparison to Reported Net Profit Margin

The adjusted net profit margin consistently tracked closely with the reported net profit margin throughout the period. However, the adjusted figures were consistently slightly higher than the reported figures each year, suggesting the presence of adjustments that positively impacted profitability. The trends observed in both metrics were largely parallel, indicating that the adjustments did not fundamentally alter the overall profitability narrative.

In conclusion, the adjusted net profit margin demonstrates a pattern of initial stability, significant disruption, and eventual recovery. The fluctuations appear to be strongly correlated with changes in both adjusted net earnings and sales to customers, with the largest decline occurring when earnings decreased more substantially than sales.

The reported return on equity (ROE) exhibited volatility over the five-year period. Initially strong at 28.20% in 2021, it decreased to 23.36% in 2022 before experiencing a substantial increase to 51.11% in 2023. This was followed by a significant decline to 19.68% in 2024 and a partial recovery to 32.87% in 2025. A similar, though less dramatic, pattern is observed in the adjusted ROE.

Adjusted Return on Equity (ROE) Trend

The adjusted ROE began at 29.25% in 2021, decreasing to 22.01% in 2022. A marked decrease occurred in 2023, falling to 7.20%. The adjusted ROE then increased to 19.91% in 2024 and further to 30.83% in 2025. The 2023 value represents the most significant deviation from the other years in the period.

Net earnings demonstrated considerable fluctuation. A decrease from US$20,878 million in 2021 to US$17,941 million in 2022 was followed by a substantial increase to US$35,153 million in 2023. Earnings then declined sharply to US$14,066 million in 2024 before recovering to US$26,804 million in 2025. The adjusted net earnings mirrored this trend, though with different magnitudes.

Shareholders’ Equity

Shareholders’ equity generally increased over the period, although not consistently. It rose from US$74,023 million in 2021 to US$76,804 million in 2022, then decreased to US$68,774 million in 2023. A modest increase to US$71,490 million occurred in 2024, followed by a more substantial increase to US$81,544 million in 2025. Adjusted shareholders’ equity followed a similar pattern.

The difference between reported and adjusted ROE suggests the presence of items impacting net earnings and/or shareholders’ equity that are being accounted for in the adjustments. The largest discrepancy between reported and adjusted ROE occurred in 2023, indicating a significant impact from these adjustments during that year. The adjusted ROE consistently presents a lower value than the reported ROE, except in 2021, suggesting a generally conservative effect from the adjustments.

Relationship between Net Earnings and Adjusted ROE

The substantial decline in adjusted net earnings in 2023 directly contributed to the significant drop in adjusted ROE for that year. The subsequent recovery in both adjusted net earnings and adjusted ROE in 2024 and 2025 indicates a strong correlation between these two metrics.

The adjusted return on assets (ROA) exhibited fluctuations over the five-year period. While initially strong, performance declined significantly in 2023 before recovering in subsequent years. A review of the underlying components reveals insights into these shifts.

Adjusted ROA Trend

The adjusted ROA began at 12.16% in 2021, decreased slightly to 9.16% in 2022, then experienced a substantial decline to 2.85% in 2023. A recovery was observed in 2024, with the adjusted ROA rising to 7.46%, followed by further improvement to 13.07% in 2025. This indicates a period of operational challenges in 2023, followed by a return to more favorable performance.

Adjusted Net Earnings

Adjusted net earnings generally followed a similar pattern to the adjusted ROA. A decrease from US$16,342 million in 2022 to US$4,523 million in 2023 likely contributed significantly to the low adjusted ROA in that year. Subsequent increases to US$12,670 million in 2024 and US$25,169 million in 2025 align with the ROA recovery.

Adjusted Total Assets

Adjusted total assets demonstrated a relatively stable trend, with a slight decrease in 2023 to US$158,445 million. This decrease, coupled with the significant drop in adjusted net earnings, amplified the decline in adjusted ROA for that year. Assets then increased to US$169,810 million in 2024 and US$192,519 million in 2025.

Comparison to Reported ROA

The adjusted ROA consistently differed from the reported ROA across all periods. The largest discrepancies were observed in 2023 and 2024. The adjustments made to net earnings and total assets appear to have a substantial impact on the calculated ROA, suggesting the presence of items affecting reported profitability and asset valuation. The reported ROA peaked at 20.98% in 2023, significantly higher than the adjusted ROA of 2.85% for the same period.

The substantial decline in adjusted ROA in 2023 warrants further investigation to understand the specific factors impacting both adjusted net earnings and adjusted total assets. The subsequent recovery in 2024 and 2025 suggests successful mitigation of these challenges.