J&J's potential talc litigation settlement draws mostly positive Street reaction

Wall Street firms are tending to respond favorably to the news that broke Tuesday that Johnson & Johnson (NYSE:JNJ) is prepared to settle talc litigation against it for $8.9B.

The settlement would involve J&J subsidiary (JNJ) LTL Management, created specifically to file for bankruptcy as a way to handle all the claims, filing a second time for bankruptcy after a judge blocked its first attempt.

Guggenheim, which has a neutral rating on shares, said that J&J's (JNJ) new plan could lift an overhang that has impacted the company's stock for a while. The firm added that resolving the talc litigation would allow investors to focus on the upcoming consumer health division separation and data readouts.

Cantor Fitzgerald also views the news as a positive, saying that the plan could finally put the talc litigation to rest and ensure that the consumer health spinoff goes along as planned. It rates the stock as overweight with a $215 price target (~36% upside based on Tuesday's close).

Wells Fargo has an overweight rating and $195 price target on J&J (~23% upside). The firm said its own legal expert gives the $8.9B settlement a 50/50 chance of going through.

In addition, the expert added that it is not clear how J&J will convince a judge to accept this bankruptcy filing after an appeals court rejected its first attempt.

That court rejected a J&J (JNJ) claim that the bankruptcy was necessary due to "financial distress" it was experiencing with the claims.