Jim Cramer says be ‘very careful’ on J&J stock: here’s why

Investors should be cautious in capitalising on a 10% year-to-date decline in Johnson & Johnson (NYSE: JNJ), says the Mad Money host Jim Cramer.

Cramer explains his view on J&J stock

His view on J&J stock is based primarily on the $8.9 billion settlement the multinational recently proposed to remove the overhang related to the long-running talc lawsuits.  

While Johnson & Johnson has repeatedly denied allegations that its talc products cause cancer, Cramer said today on CNBC’s “Squawk on the Street”:

You have to be very careful … see how they do on this lawsuit [that has] closing arguments today. If they lose this case, it could hurt them in the overall ability to accrue all bankruptcy cases.

J&J is scheduled to report its Q2 earnings next week. Consensus is for it to earn $2.62 a share versus $2.59 per share a year ago.

Cramer’s view is in contrast with Citigroup

Note that analysts at Citigroup recently resumed coverage of J&J stock with a ‘buy’ rating and $185 price objective – up more than 15% from here.

They are particularly bullish after Johnson & Johnson listed its consumer health business earlier this year as a separate publicly traded company. Still, Cramer said this morning:

I went to a couple lawyers on this [talc lawsuits]. They said a 24-year-old who may be dying – the facts may not even matter to the jury, because it’s a left-wing jury in Alameda, California.

Also on Monday, Cramer’s Charitable Trust sold 30 shares of Caterpillar Inc. The Trust still owns 340 shares of the construction equipment manufacturer.