Johnson & Johnson's acquisition of biotech company Actelion will help to re-accelerate top-line growth, according to one Wall Street firm.
Wells Fargo raised its rating on J&J on Monday, saying improved performance could lead to better-than-expected third-quarter results and gains in 2018.
"With the accretion from Actelion, more measured impact from biosimilar competition than expected, solid performance of key drugs and a pipeline that is coming to fruition, we believe that JNJ is poised to reaccelerate its top-line growth," analyst Larry Biegelsen wrote in a note to clients Monday. "Our analysis of IMS data, Nielsen report and FX trend suggests potential upside in Q3 sales, although the near-term impact of the recent hurricanes makes it hard to handicap any EPS upside."
Biegelsen increased his total third-quarter sales estimate by $103 million to $19.39 billion, above Wall Street consensus of around $19.3 billion, according to the report. He also raised his price target on J&J to $149 from $140, representing 12 percent upside from Friday's close.
The stock is up more than 15 percent since January, outperforming the market. The company announced plans earlier this year to acquire Swiss biotech company Actelion in a $30 billion all-cash deal, providing J&J access to high-price, high-margin medicines for rare diseases. The deal closed in June.
The shares were up fractionally Monday. The drugmaker is set to report earnings on Oct. 17.
With several sources of upside, the analyst considers third-quarter 2017 as "a turning point" for J&J sales growth in 2018. In addition to the gains from Actelion, Biegelsen said the company could see further top-line success thanks to increased cost saving and greater foreign exchange tail winds in the next year.
"We could see the company overachieve its cost savings targets," he added. "FX tailwind may be closer to 100 basis points, which would translate to additional sales of $500 million."
The analyst estimates 2018 Johnson & Johnson total revenue of $80.33 billion and EPS of $7.76, ahead of the Wall Street consensus of $79.99 billion and $7.73, respectively.