JNJ Agrees to Sell Medical Diagnostics Business to Carlyle Group

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JNJ Agrees to Sell Medical Diagnostics Business to Carlyle Group

(JNJ, $98.48, up $1.04 in early trading)

(CG, $35.27, up $0.97 in early trading)

Worldwide healthcare giant Johnson & Johnson (JNJ) has agreed to sell its Ortho-Clinical Diagnostics unit to Carlyle Group LP (CG) for $4 billion.

Carlyle plans to establish the medical diagnostics business as a stand-alone company.  The diagnostics business achieved $1.89 billion in revenue in 2013.  Its main product is blood tests which screen for diseases.

Carlyle made the original purchase offer in January.  J&J received two other offers, which indicates a willingness and ability for additional industry-wide M&A activity to take place.  “Today’s move is part of an industry trend in which Pfizer Inc. and Merck & Co. have [also] sold or may sell off secondary units to focus on primary businesses,” reports Bloomberg.  The deal will close in mid-2014.

JNJ reached a record $71.3 billion in 2013 sales and $13.8 billion net income.  Wall Street expects JNJ’s earnings per share (EPS) to grow 6%, 8% and 11% in 2014 through 2016 (Dec. year-end).  The 2014 price-earnings ratio (PE) is 16.9, within a normal ten-year range of 11-20; and the dividend yield is 2.7%.

The stock spent about ten years trading sideways, before breaking out a year ago.  More recently, the stock traded sideways for eight months before breaking out again last week, reaching new highs today.  The chart is extremely bullish, but the stock does not qualify for a Goodfellow LLC buy recommendation due to slow earnings growth and a high PE.

If I owned the stock, I would hold it for additional capital gains, and use a stop-loss order to protect my principal at $92.

I would not buy the stock, despite the bullish chart, but would instead concentrate on owning stocks with both bullish charts and strong projected earnings growth, thereby increasing my chances of capital gains and minimizing the inherent risk in stock investing.  Subscribers can review my weekly feature, Monday’s “Buy List”, for good stock ideas.

Goodfellow LLC Rating:  Hold, Public.  (03-31-14)

(scroll down for a brief discussion of Carlyle Group)

JNJ Chart

JNJ data by YCharts



EPS at Carlyle Group (CG) are projected to fall in 2014, rise 11% in 2015, and fall again in 2016.

The stock chart is neutral, short-term; and bullish, medium-term.

Carlyle Group shares do not earn a buy rating at Goodfellow LLC due to the lack of earnings growth.  If I owned the shares, I would use a stop-loss order to protect the downside, continually re-assessing capital gain potential, with a willingness to sell either at upside resistance, or after the stock’s next upward move.

Investors who want to know more about Carlyle Group (debt ratios, etc.) may email me at

Goodfellow LLC Rating:  Hold, Public.  (03-31-14)

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Happy investing!

Crista Huff


Goodfellow LLC

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