Last Earnings Release 10/17/2017. Last Qtr. Actual vs. Est. $1.85 / $1.80. Next Release 01/23/2018 $1.80. Year Ending 12/31/2016 $6.

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1 Grade Earnings Last Earnings Release 10/17/2017 Last Qtr. Actual vs. Est. $1.85 / $1.80 Next Release 01/23/2018 $1.80 Year Ending 12/31/2016 $6.71 Quick Facts Dividend Yield 2.35% 52 Wk High $ Wk Low $ Short Interest 1% of float $ /14/2017 Rated 'UY' since Dec 8th, 2016, when it was upgraded from 'HOLD' Year Ending 12/31/2017 $7.13 Market Cap $374.7 Overview Company Performs Well In Fundamental Analysis MarketGrader currently has a UY rating on Johnson & Johnson (JNJ), based on a final overall grade of scored by the company's fundamental analysis. scores at the 88th percentile among all 5809 North American equities currently followed by MarketGrader. Our present rating dates to December 8, 2016, when it was upgraded from a HOLD. Relative to the Pharmaceuticals: Major sub-industry, which is comprised of 34 companies, 's grade of ranks sixth. The industry grade leader is iosyent Inc. (RX.CA) with an overall grade of The stock, up 9.92% in the last six months, has outperformed both the Pharmaceuticals: Major group, up 5.44% and the S&P 500 Index, which has returned 9.25% in the same period. Please go to pages two and three of this report for a complete breakdown of JNJ's fundamental analysis. Price, Rating and Sentiment History - 2 Years 1

2 Growth - While Not Entirely Negative, Growth Indicators Show Several Signs of Weakness According to its latest earnings report, booked $19.64 Market Growth LT F billion in total revenue last quarter, a 10.19% rise from the year earlier period's $17.83 billion, which is not only a healthy increase but an Market Growth ST F improvement from its long term sales growth. Also including the latest EPS Growth A+ quarter the company had $74.41 billion in 12-month trailing revenue, only 0.02% higher than the $74.40 billion booked during the equivalent period Growth Potential C ended three years ago, a modest increase in such timeframe. The next couple of quarters will help investors determine if the recent increase in Earnings Momentum top line growth is sustainable and whether it will lead to higher profits. In its latest report the company also said profit fell from the comparable Earnings Surprise - quarter a year ago, extending its long term profit decline. We measure long term profit growth by comparing full year (12-month trailing) net income to the equivalent period three years earlier. posted a Third quarter profit decrease of 11.89% to $3.76 billion from $4.27 billion (excluding extraordinary items) a year earlier; it also reported a 8.62% drop in profit in the 12 months ended last quarter to $15.83 billion from the $17.32 billion it made in the same period three years before. The company's margins fell during the latest quarter with an average 0.84% decline in EITDA, operating and net margins from a year earlier, reversing an increase reported in the preceding quarter. The company's stock rose a moderate 3.35% after it reported earnings on October 17, 2017 that were 2.78% higher than what analysts were expecting. With this report it extends its positive earnings surprise record, having beaten analysts' estimates, on average, by 2.52% with its last six earnings reports. Revenue Qtrly. 09/30/2017 $19.6 Revenue Qtrly. Year Ago $17.8 Revenue 1 Yr. Chg % Revenue 12 Mo. Tr. Latest $74.4 Revenue 12 Mo. Tr. 3Y Ago $74.4 Revenue 12 Mo. Tr. 3Y Chg. 0.02% Net Income Qtrly. 09/30/2017 $3.8 Net Income Qtrly. Year Ago $4.3 Net Income 1 Yr. Chg. (11.89%) Net Income 12 Mo. Tr. Latest $15.8 Net Income 12 Mo. Tr. 3Y Ago $17.3 Net Income 12 Mo. Tr. 3Y Chg. (8.63%) Value Assuming the Company's Fundamentals Don't Deteriorate in Coming Quarters, the Stock's Valuation is Acceptable at this Level Shares of trade currently at times the Capital Structure company's 12-month' earnings per share, which represents a small 4.73% premium to the MarketGrader-calculated optimum P/E ratio of This P/E Analysis C ratio is based on the company's last five years of quarterly earnings, Price/ook Ratio F grouped in 12-month rolling periods to determine their growth rate. 's earnings per share, based on this measure, have Price/Cash Flow Ratio + grown at an annualized 13.63% rate during this time. The current strength in the company's financial performance, evidenced by a high overall Price/Sales Ratio A Profitability grade and such a strong EPS growth rate, is not sustainable unless the recent margin contraction is reversed. Otherwise the stock Market Value + price may feel downward pressure as earnings growth begins to decelerate. The stock's forward P/E of 18.10, based on its earnings estimate for the next four quarters, represents a premium to the S&P 500 index's forward P/E of but is lower than its trailing P/E of Therefore value could apparently be found in the company's future earnings growth even though relative to the market the stock might not seem cheap (the fundamentals may already be factored into the price). ut assuming the company remains fundamentally strong, the stock might have further room to run, or at least be a relatively safe place to be if earnings estimates materialize into actual reported results. 's are trading at 5.16 times their book value, which is based on the company's stockholders' equity. However, MarketGrader's price to book value analysis is based on a company's tangible book value, which excludes goodwill and other intangibles from its assets. In this case, s' intangible assets of $ billion exceed its $73.98 billion in stockholders' equity by $47.31 billion, which means its tangible book value is negative. This makes the shares' price to tangible book ratio meaningless. Thus, part of the risk of owning the company's shares lies in the possibility of a significant write-down of its intangible assets, which would automatically make its shares much more expensive than they currently appear to be. Its shares seem reasonably priced at times the $7.89 in cash flow per share generated by the company over the last twelve months, if only because its overall fundamentals are pretty healthy. Its stock price is also 5.03 times its trailing 12-month sales, a 62.44% discount to the Pharmaceuticals: Major industry's average price to sales ratio of Finally, from a value perspective, we look at how much bigger the company's market capitalization is than its latest operating profits after subtracting taxes. ased on this measure 's $ billion market cap is an acceptable valuation, representing a modest multiple of times its latest quarterly net income plus depreciation. P/E Ratio 12 Mo. Tr. 09/30/ Optimum P/E Ratio Forward P/E Ratio 18.1 S&P 500 Forward P/E Ratio Price to (Tangible) ook Ratio Price-to-Cash Flow Ratio Price/Sales Ratio

3 Profitability A- Asset Utilization A+ Capital Utilization Operating Margins A- Relative Margins A+ Return on Equity Quality of Revenues - common stock. Company's Operations Are Very Profitable and Indicate a Solid usiness Environment has a strong 12-month trailing profitability record based on solid returns on shareholder equity, operating margins that exceed its peer group average and a remarkable net profit margin. The $15.83 billion net profit earned by the company in the last four quarters was equivalent to 21.27% of total sales. The average operating margin for the Pharmaceuticals: Major industry was 12.54% during the same period, % below the company's 28.05%. While 's 21.39% return on equity is solid--based on 12-month trailing earnings--it represents a slowdown from the year-earlier period's return on equity of 21.68%. Our system looks at this ratio in an attempt to measure management's efficiency in rewarding investors in the company's Despite this moderate downturn the company's leverage is low enough that it could be increased without overburdening the company in order to ensure that current profitanility is sustained. Its total debt is only 0.48 times total equity while long term debt makes up 26.50% of total capital. 's core earnings in the last twelve months grew moderately from the twelve months ended a year earlier. The company's EITDA for the most recent period was $26.94 billion, or 5.00% above the $25.66 billion earned from its core operations in the prior period. EITDA is used by MarketGrader to measure the company's true earnings power since it includes interest expenses, income taxes, depreciation and amortization, all non-operating expenses, which are nevertheless accounted for in other parts of our analysis that look at EPS gains and net income. Cash Flow A- Company's Cash Flow Indicators Are Solid Across the oard but Offer Some Room for Improvement made $6.27 billion in cash flow last quarter, 16.88% Cash Flow Growth - better than the $5.36 billion reported last year for the comparable period. While very healthy, this latest growth rate is significantly lower than the EIDTA Margin % increase in twelve month trailing cash flow compared to the year Debt/Cash Flow Ratio A+ earlier period, underscoring a slowdown in the company's core operations. This could lead to lower earnings expectations and Interest Cov. Capacity A+ consequently a lower valuation for the stock. At the end of last quarter the company's net debt to EITDA ratio was 2.51, significantly higher than Economic Value A- the year earlier ratio of Despite such a large increase the latest number is very low and doesn't imply there are any issues with the Retention Rate A+ company's leverage or its ability to finance it with the cash flow generated by its operations. net debt, defined as total debt minus cash on hand, was $18.94 billion last quarter and EITDA was $7.54 billion. During the same period 's total debt went from accounting for 27.05% of its total capital to 32.22% in its latest quarter, while its cash on hand fell by 59.86%. Unless it begins generating a larger cash flow from operations, all this increased leverage may start hindering future growth and further erode the company's profitability. MarketGrader also measures the true economic profit generated by during the past year by taking into account not only the costs of operating the business but also the cost of capital, both equity and debt. ased on 12-month trailing operating income, had a total 20.73% return on $ billion of total invested capital, which includes common and preferred equity as well as long term debt. Its total after tax cost of capital is heavily weighted towards equity, with a total after tax cost of 4.60% compared to a 0.57% cost of debt. The company's economic value added (EVA), which results from subtracting the 5.17% total cost of capital from its return on investment, is 15.56%. This is a solid return to shareholders for a one year period. The company increased its quarterly common dividend on September 30, 2017 by 5.00%, to $84.00 cents a share from $0.80 cents. It has paid a dividend for at least 40 years and, based on this latest payout, the stock is currently yielding 2.35%., which recently increased its payout ratio, has spent $8.86 billion in common dividend payments during the last 12 months. This represents 41.00% of total cash flow and 55.96% of after-tax earnings, a modest increase from the 53.80% of earnings it paid out in the year ended a quarter earlier. The increasing trend of an already elevated payout is worth monitoring for signs fo liquidity problems even though the company's fundamentals are generally healthy. Cash Flow Qtrly. 09/30/2017 $6.3 Cash Flow Qtrly Year Ago $5.4 Cash Flow 1 Yr. Chg % Cash Flow 12 Mo. Tr. Latest $21.6 Cash Flow 12 Mo. Tr. 3Y Ago $18.2 Cash Flow 12 Mo. Tr. 3Y Chg % Free Cash Flow Last Qtr. $5.5 Economic Value Total Invested Capital $109.1 Return on Inv. Capital 20.73% Weighted Cost of Equity 4.60% Weighted Cost of Debt 0.57% Total Cost of Capital 5.17% Economic Value Added 15.57% 3

4 Profile is engaged in the research and development, manufacture and sale of a broad range of products in the healthcare field. The company's primary focus is on products related to human health and well-being. It is organized into three business segments: Consumer, Pharmaceutical and Medical Devices & Diagnostics. The Consumer segment includes a broad range of consumer health and personal care products in the beauty, baby, oral care and women's health categories, as well as nutritional products and over-the-counter medicines and wellness and prevention platforms. The Pharmaceutical segment focuses on unmet medical needs across several therapeutic areas such as oncology, infectious disease, immunology, neuroscience, cardiovascular and metabolism. It includes products in the anti-infective, antipsychotic, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, urology, thrombosis, vaccines and virology fields. The Medical Devices & Diagnostics segment includes a broad range of products distributed to wholesalers, hospitals and retailers used principally in the professional fields by physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. It focuses on technologies, solutions and services in the fields of cardiovascular disease, diabetes care, orthopaedics, vision care, wound care, aesthetics, sports medicine, infection prevention, minimally invasive surgery, and diagnostics. The company was founded by Robert Wood Johnson, James Wood Johnson and Edward Mead Johnson in 1886 and is headquartered in New runswick, NJ. Key Facts: One Plaza New runswick,nj Phone: iggest Company in Sub-Industry (JNJ) Grade Market Cap:$ billion Smallest Company in Sub-Industry Crescita Therapeutics, In Grade 29.1 Market Cap:$8.40 million MarketGrader Dilution Analysis Impact of Change in Shares on EPS - Q Dilution Summary *EPS Latest $1.37 *EPS Year Ago $1.53 EPS Change 1 Yr. (10%) C. Shares - Latest(M) 2,738 C. Shares - Yr Ago(M) 2,785 C. Shares - 1Yr Chg. (2%) EPS if Yr. Ago Shares $1.35 EPS Chg. if Yr. Ago (12%) EPS Loss from Dilution $0.02 *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. Income Statement Last Qtr (09/2017) 12 Mo. Trailing Revenue $19.6 $74.4 Op. Income $4.9 $20.9 Net Income $3.8 $15.8 *EPS $ *Earnings per share are based on fully diluted net income per share excluding extrodinary items. This number may not match the headline number reported by the company. alance Sheet Total Assets Total Debt Latest $155.7 $35.2 Stockholders Eq. $74.0 All numbers in millions except EPS Ratios Price/Earnings (12 mo. trailing) Price/Tangible ook Price/Cash Flow Price/Sales 5.03 Debt/Cash Flow 18 Return on Equity 21.39% Gross Margin (12 mo. trailing) 65.33% Total Assets Intangible Assets Long Term Debt Total Debt ook Value Enterprise Value $155.7 $121.3 $26.7 $35.2 $74.0 $18.9 '12 '13 '14 '15 '16 '17 Qtr Qtr Qtr Qtr Operating Margin (12 mo. trailing) 28.05% Net Profit Margin (12 mo. trailing) 21.27% 4

5 Top Down Analysis Health Care Stocks in Sector: 714 uys: 64 (8.96%) Holds: 63 (8.82%) Sells: 587 (82.21%) No. of stocks at: 52-Wk. High: Wk. Low: 44 Above 50 & 200-day MA: 218 elow 50 & 200-day MA: 325 Pharmaceuticals: Major Stocks in Sub-Industry: 35 uys: 6 (17.14%) Holds: 4 (11.43%) Sells: 25 (71.43%) No. of stocks at: 52-Wk. High: 0 52-Wk. Low: 3 Above 50 & 200-day MA: 11 elow 50 & 200-day MA: 13 # Ticker Grade Sentiment Name Price Next EPS 1 CNCE N Concert Pharmaceuticals, Inc. $ /01/ EGRX N Eagle Pharmaceuticals, Inc. $ /15/ RX.CA N iosyent Inc. $ /22/ MDXG N MiMedx Group, Inc. $ /27/ UTHR N United Therapeutics Corporation $ /31/ EXEL N Exelixis, Inc. $ /08/ DMG.H N DMD Digital Health Connections Group $0.24 N/A 8 MASI N Masimo Corporation $ /13/ CERC N Cerecor Inc $ /07/ EN.CA N Epicore ionetworks Inc. $ /07/ JNJ 3 P $ /23/2018 # Ticker Grade Sentiment Name Price Next EPS 1 RX.CA N iosyent Inc. $ /22/ AV P AbbVie, Inc. $ /26/ NVO P Novo Nordisk A/S Sponsored ADR Class $ /02/ GRFS N Grifols, S.A. Sponsored ADR Class $ /03/ MY P ristol-myers Squibb Company $ /25/ JNJ 3 P $ /23/ SHPG N Shire PLC Sponsored ADR $ /15/ PFE P Pfizer Inc. $ /30/ AZN P Astrazeneca PLC Sponsored ADR $ /10/ GSK N GlaxoSmithKline plc Sponsored ADR $ /07/ Price Trend. A+ 2. Price Momentum Earnings Guidance. 4. Short Interest. A+ 8.4 Copyright 2010 MarketGrader.com Corp. All rights reserved. Any unauthorized use or disclosure is prohibited. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or any options, futures or other derivatives related to such securities ("related investments"). The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regards to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. MarketGrader does not make markets in any of the securities mentioned in this report. MarketGrader does not have any investment banking relationships. MarketGrader and its employees may have long/short positions or holdings in the securities or other related investments of companies mentioned herein. Officers or Directors of MarketGrader.com Corp. are not employees of covered companies. MarketGrader or any of its employees do not own shares equal to one percent or more of the company in this report. 5