By Jack Hough

My car recently began making a clanging noise while braking and accelerating. The fix would be free, I knew from experience -- adjust the driver's seat forward, and then remove the empty water canisters left rolling on the floor. These are hulking metal affairs from Stanley, Yeti, and Owala. My family has somehow accumulated more than a dozen, and after a weekend of hauling kids to sports, the rear of our car brings to mind spent oxygen tanks littering the final ascent of Mount Everest.

I somehow survived childhood by drinking water before leaving home, and slurping from the occasional drinking fountain or garden hose. Today, standard loadout for a kid on the move includes 32 filtered ounces, chilled and sealed in combat-grade steel. Would you believe that these vessels can prove too small? Asked for upgrades, I found plastic 64-ounce Thermos jugs on Amazon discounted from $25 to $20 -- fine for my son, but my daughter deemed them deeply uncool. So off I went to Dick's Sporting Goods, where endless rows of insulated drinkware now dwarf displays for sports equipment. It turns out that Yeti Holdings recently introduced a 64-ounce Rambler with Chug Cap. I got soaked for $65.

I wrote favorably about Yeti in Barron's back in February 2019 (" This Outdoor Gear Stock Has 60% Upside"). Shares were just under $22 at the time. By November 2021, they topped $100. They've now tumbled all the way back to $32. That includes a 10% drop this past Thursday on a poorly received quarterly report. Net sales fell 4%, which management blamed on a "more promotional drinkware environment." The company, which will turn 20 next year, started off making rugged coolers for anglers and other outdoorsy types. Today, more than half the business is drinkware. What if customers have reached Peak Chug?

Jefferies analyst Randal Konik, one of Yeti's biggest boosters on Wall Street, both in 2019 and now, points out that management trimmed its sales guidance for the year but raised its profit guidance. He views that as a sign that the company is navigating the drinkware spill well. Inventory fell, suggesting that sell-through at stores has been stronger than wholesale orders. The company is launching 30 new products this year; it already does tote bags, camp chairs, dog beds, skillets, flasks, and much more. Free cash flow is healthy, management is buying back stock, and the valuation is down to 12 times next year's projected earnings.

I have a feeling that I top-ticked the jug market with my pricey Rambler splash-out, but drinkware downside for Yeti might already be priced in.

If you've held Johnson & Johnson stock over the past decade, you've made 129% -- just less than half the return of the S&P 500 index. Earnings have hovered around $10 a share for five years. Consumer products had been a drag, but two years ago the company ripped off the Band-Aid -- and the Listerine, Tylenol, and Neutrogena -- when it spun off Kenvue, raising $13.2 billion. Today, J&J has a stock market value of $416 billion, ranking 20th in size among publicly traded U.S. companies, and second among drugmakers behind Eli Lilly, which is riding obesity riches. But if J&J is too big to ignore, it has also been too dull to dwell on.

So why did the stock jump 6% in a day last month after the company reported second-quarter financial results? Forget what Wall Street says about earnings or sales topping consensus estimates. The only real upside surprise is one that moves the stock. Also, why is J&J solidly beating the market year to date, returning over 20%, even though the iShares U.S. Healthcare exchange-traded fund, which tracks a basket of drug and medtech names, is flailing, down 6%? Things are starting to look, well, borderline pre-interesting.

"We're entering a new cycle of growth," J&J chief financial officer Joe Wolk tells me. The company has a drug called Stelara for psoriasis and inflammatory bowel disease that brought in $10.4 billion in revenue last year, and just hit a patent cliff. Wall Street reckons the drug will do about $4 billion less this year.

"I think investors were skeptical," says Wolk. "Can this pipeline that you've talked about that's gonna treat bladder cancer, lung cancer, continue to have solutions for psoriasis and inflammatory bowel disease -- can they deliver? And what we're seeing year to date is not only is it delivering what we said; it's delivering beyond what we said."

The drug unit just reported its first $15 billion quarter, despite losing $1.2 billion in Stelara sales year over year. Thirteen other drugs grew sales by double-digit percentages. The company's ambition is to be the top oncology player by 2030, with sales of more than $50 billion. It is also focused on central nervous system conditions like schizophrenia and depression tied to bipolar disorder; earlier this year it agreed to pay $14 billion for a rising drugmaker there called Intra-Cellular Therapies. Other deals have added heft in cardiac devices, which the company sees as an area of unmet need and fast future growth.

J&J has exposure to litigation around talcum powder and ovarian cancer, which Wolk blames on class-action advertising and the tort system. "That really kind of goes against what the [Trump] administration is for, in terms of it doesn't create jobs, it doesn't improve GDP [gross domestic product], and it's founded on junk science," he says.

J.P. Morgan, which rates J&J stock at Neutral, calls the talc exposure "highly manageable," but writes that it will likely be overly reflected in the stock valuation until there is more clarity.

Bulls on Wall Street are in the minority. One of them, Raymond James analyst Jayson Bedford, writes that last quarter was likely the bottom in terms of organic revenue growth. Consensus estimates have J&J finally pushing beyond $10 a share in earnings, toward more than $15 by 2030. Shares currently trade at 15.8 times this year's projected earnings and pay a 3.1% dividend.

Write to Jack Hough at jack.hough@barrons.com. Follow him on X and subscribe to his Barron's Streetwise podcast.

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August 08, 2025 17:02 ET (21:02 GMT)

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