Johnson & Johnson (NYSE:JNJ) was hit with a hefty fine on Thursday as it was announced that the company would have to pay $4.7 billion to individuals that claimed they had developed ovarian cancer as a result of using its products.
While only $550 million was award in compensation to the affected women, the company was saddled with an additional $4.14 billion in punitive damages. However, this may not be the end for Johnson & Johnson as it is still facing even more lawsuits relating to its talcum power products.
The popular healthcare company is known worldwide for its products but this could affect not only its financials but its image as well. When it comes to healthcare, consumers go with brands they trust, and this has the potential to hurt the company’s long-term growth.
Johnson & Johnson has already run into a bit of a ceiling as in four years its sales have risen by only 7%. In after-hours trading the stock was down by more than 2%, but the losses could climb in the days and weeks to come.
The danger for investors is if this issue gets bigger it could get even more costly for the company. In some cases, we’ve seen consumers and investors have short memories when it comes to bad press. However, when it involves cash and big lawsuits, it’s a lot harder to recover from since those reminders show up on the company’s financials.
Johnson & Johnson is a stock I’d avoid right now, at least until we get a clearer picture of just how big this problem will be for the company.
This article provided by NewsEdge.