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Why Johnson & Johnson Stock Has Lost 13% So Far in 2018

What happened

Shares of healthcare titan Johnson & Johnson (NYSE: JNJ) trailed the market through the first six months of 2018 by shedding 13%, compared to a 2% uptick in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX data by YCharts.

The decline has pushed the stock below broader market returns over the past one-year and three-year time frames.

So what

Johnson & Johnson's latest results haven't given investors much to worry about. In fact, sales and profits beat expectations in the most recent quarter, thanks mainly to a booming pharmaceutical segment. The drugmaker's portfolio continues to grow, which is helping offset some of the pain from declining prices for its blockbuster Remicade treatment.

Image source: Getty Images.

Now what

CEO Alex Gorsky and his team raised their sales outlook in April, and now believe organic growth should range between 4% and 5%, up from the prior target of between 3.5% and 4.5%. Over the short term, investors are concerned that a political battle over drug pricing might harm Johnson & Johnson's profitability, and so shares are likely to react to major news on that front.

The long-term competitive outlook is bright, though. It's especially so considering that reduced tax expenses are slated to power a 15% increase in research and development spending over the next four years, to $30 billion.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of Johnson & Johnson. The Motley Fool has a disclosure policy.

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