Financial Analysis: Johnson & Johnson (NYSE:JNJ) vs. Zoetis (NYSE:ZTS)

Johnson & Johnson (NYSE:JNJ) and Zoetis (NYSE:ZTS) are both large-cap healthcare companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, profitability, analyst recommendations, dividends, institutional ownership, valuation and risk.

Analyst Recommendations

This is a breakdown of recent recommendations for Johnson & Johnson and Zoetis, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Johnson & Johnson	0	8	17	1	2.73
Zoetis	1	12	7	0	2.30

Johnson & Johnson presently has a consensus price target of $275.92, suggesting a potential upside of 0.27%. Zoetis has a consensus price target of $98.20, suggesting a potential upside of 24.61%. Given Zoetis’ higher possible upside, analysts clearly believe Zoetis is more favorable than Johnson & Johnson.

Risk and Volatility

Johnson & Johnson has a beta of 0.21, indicating that its share price is 79% less volatile than the S&P 500. Comparatively, Zoetis has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500.

Dividends

Johnson & Johnson pays an annual dividend of $5.36 per share and has a dividend yield of 1.9%. Zoetis pays an annual dividend of $2.12 per share and has a dividend yield of 2.7%. Johnson & Johnson pays out 81.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Zoetis pays out 34.9% of its earnings in the form of a dividend. Johnson & Johnson has increased its dividend for 64 consecutive years and Zoetis has increased its dividend for 14 consecutive years. Zoetis is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Johnson & Johnson and Zoetis”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Johnson & Johnson	$94.19 billion	7.03	$26.80 billion	$6.60	41.69
Zoetis	$9.47 billion	3.44	$2.67 billion	$6.07	12.98

Johnson & Johnson has higher revenue and earnings than Zoetis. Zoetis is trading at a lower price-to-earnings ratio than Johnson & Johnson, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

69.6% of Johnson & Johnson shares are held by institutional investors. Comparatively, 92.8% of Zoetis shares are held by institutional investors. 0.2% of Johnson & Johnson shares are held by insiders. Comparatively, 0.2% of Zoetis shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Johnson & Johnson and Zoetis’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Johnson & Johnson	16.20%	31.64%	13.04%
Zoetis	27.49%	74.89%	18.59%

About Johnson & Johnson

Johnson & Johnson is a holding company, which engages in the research, development, manufacture, and sale of products in the healthcare field. It operates through the Innovative Medicine and MedTech segments. The Innovative Medicine segment focuses on immunology, infectious diseases, neuroscience, oncology, cardiovascular and metabolism, and pulmonary hypertension. The MedTech segment includes a portfolio of products used in the interventional solutions, orthopaedics, surgery, and vision categories. The company was founded by Robert Wood Johnson I, James Wood Johnson, and Edward Mead Johnson Sr. in 1887 and is headquartered in New Brunswick, NJ.

About Zoetis

Zoetis Inc. engages in the discovery, development, manufacture, and commercialization of animal health medicines, vaccines, and diagnostic products and services in the United States and internationally. The company commercializes products primarily across species, including livestock, such as cattle, swine, poultry, fish, and sheep and others; and companion animals comprising dogs, cats, and horses. It also offers parasiticides, vaccines, dermatology, other pharmaceutical, anti-infectives, animal health diagnostics, and medicated feed additives. In addition, the company provides animal health diagnostics, including point-of-care diagnostic products, instruments and reagents, rapid immunoassay tests, reference laboratory kits and services, and blood glucose monitors; and other non-pharmaceutical products, which include nutritionals, as well as products and services in biodevices, genetic tests, and precision animal health. It markets its products to veterinarians, livestock producers, and pet owners. The company has collaboration Blacksmith Medicines, Inc. to discover and develop novel antibiotics for animal health. Zoetis Inc. was founded in 1952 and is headquartered in Parsippany, New Jersey.