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Johnson & Johnson (JNJ) Down 2.6% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Johnson & Johnson (JNJ - Free Report) . Shares have lost about 2.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Johnson & Johnson due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Beats Q3 Earnings & Sales Estimates Post Spin-Off
J&J’s third-quarter 2023 earnings came in at $2.66 per share, which beat the Zacks Consensus Estimate of $2.52. Earnings rose 19.3% from the year-ago period.
Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported third-quarter earnings of $1.69 per share, up 4.3% from the year-ago quarter.
Sales were $21.35 billion, beating the Zacks Consensus Estimate of $21.00 billion. Sales rose 6.8% from the year-ago quarter, reflecting an operational increase of 6.4% and a positive currency impact of 0.4%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 4.9% on an operational basis.
Third-quarter sales in the domestic market rose 11.1% to $12.0 billion. International sales rose 1.6% on a reported basis to $9.36 billion, reflecting an operational increase of 0.7% and a positive currency impact of 0.9%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 0.3% in the quarter.
In the third quarter, J&J presented its Consumer Health business as discontinued operations in its financial statements and recorded a one-time non-cash gain of approximately $21 billion in the quarter.
Segment Details
Sales in J&J’s Innovative Medicines segment (previously the Pharmaceutical segment) rose 5.1% year over year to $13.89 billion, reflecting a 4.3% operational increase and a 0.8% positive currency impact. Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 4.4%. Innovative Medicines sales beat the Zacks Consensus Estimate of $13.37 billion as well as our model estimate of $13.27 billion. Excluding sales from J&J’s COVID-19 vaccine, operational sales grew 8.2%.
In Innovative Medicines segment, sales in the United States rose 10.9% while that outside the United States declined 2.3%.
Higher sales of key products such as Darzalex, Stelara, Tremfya and Erleada drove the segment’s growth. New drugs like Carvykti and Spravato also contributed to growth. The sales growth was dampened by lower sales of Imbruvica, COVID vaccine and generic/biosimilar competition to drugs like Zytiga and Remicade.
Darzalex sales rose 21.8% year over year to $2.5 billion in the quarter, driven by continued share gains and market growth. Sales, however, slightly missed the Zacks Consensus Estimate of $2.54 billion and our model estimate of $2.57 billion.
Stelara sales grew 16.9% to $2.86 billion in the quarter driven by strong market growth and a favorable patient mix. Stelara sales beat the Zacks Consensus Estimate of $2.64 billion and our model estimate of $2.65 billion.
In May, J&J settled its litigation with Amgen, as a result of which J&J does not anticipate the launch of a biosimilar version of Stelara until January 2025. J&J, on the conference call, said Stelara biosimilars are not expected to be launched in 2024.
Imbruvica sales declined 11.3% to $808.0 million. Rising competitive pressure in the United States due to new oral competition has been hurting sales of Imbruvica for the past few quarters. Imbruvica sales were however better than the Zacks Consensus Estimate of $771.0 million and our estimate of $759.0 million.
Erleada generated sales of $631 million in the quarter, up 28.7% year over year, driven by continued share gains and market growth. Erleada sales beat our model estimate of $614.3 million. Tremfya recorded sales of $891 million in the quarter, up 22.2% year over year driven by strong market growth and a favorable patient mix. Tremfya beat the Zacks Consensus Estimate of $801 million as well as our model estimate of $867.9 million.
New drug Carvykti, recorded sales of $152 million compared with $117 million in the previous quarter driven by the ongoing launch, share gains and capacity improvement. New drug Spravato recorded sales of $183.0 million compared with $169.0 million in the previous quarter. J&J expects to begin disclosing Tecvayli sales from the first quarter of 2024 which is now included in Other Oncology.
PAH revenues of $954 million rose 12% year over year. In PAH, Uptravi sales rose 20.74% to $402 million.
Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales declined 0.2% to $1.03 billion in the quarter. Simponi/Simponi Aria sales rose 15.3% to $629.0 million, while Prezista sales declined 7.8% to $447 million. Xarelto sales declined 9.4% in the quarter to $625 million.
Zytiga sales declined 53% to $214.0 million in the quarter due to generic competition. Sales of Remicade were down 17.4% in the quarter to $461 million.
J&J’s single-dose COVID-19 vaccine generated sales of $41 million in the quarter, down 91.5% year over year. International sales accounted for all COVID-19 vaccine sales.
In 2024, J&J expects key products like Darzalex, Tremfya, Erleada, Invega Sustenna and Uptravi and rapid progress of new products to drive growth in the Innovative Medicines segment.
MedTech segment sales came in at $7.46 billion, up 10% from the year-ago period, as an operational increase of 10.4% was offset by a negative currency movement of 0.4%. MedTech segment sales missed the Zacks Consensus Estimate of $7.59 billion as well as our model estimate of $7.70 billion.
In the MedTech segment, sales rose 11.6% in the United States and 8.3% outside of the United States
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 6%. Abiomed, acquired last year, contributed 4.6% to sales growth.
Sales in the MedTech businesses continued to benefit from strong procedure recovery and new products, which were partially offset by international sanctions in Russia, volume-based procurement (VBP) issues in China and supply challenges in some categories.
Interventional Solutions grew 47.0%, driven by strong sales growth of electrophysiology products, including Europe. In Surgery, Advanced Surgery rose 0.5% while General Surgery rose 4.0% worldwide. Worldwide orthopedics rose 3.4%, driven by strong procedure recovery and successfully launched new products, partially offset by the impact of the VBP program in China (in spine and trauma). Worldwide Vision rose 4.2%, driven by price increases and new products, which were partially offset due to the Blink divestiture.
In 2024, in the MedTech segment, J&J expects its commercial capabilities and continued uptake from recently launched products to drive sales, The worldwide procedure volumes in 2024 are expected to remain similar to 2023 levels, which benefited from the post-pandemic recovery. In 2024, J&J expects overall MedTech market procedure to grow in the range of 5-7% versus the traditional range of 4-6%.
2023 Guidance Upped
In August, J&J provided updated financial guidance for 2023, following the complete separation of Kenvue. Along with its third-quarter results, J&J raised its full-year guidance for adjusted earnings and sales growth.
J&J now expects revenues in the range of $83.6 billion-$84.0 billion compared with the earlier expectation of $83.2 billion-$84.0 billion. Revenue growth is now expected in the range of 7.5 versus the prior expectation of 7. All revenue figures exclude any revenues from COVID-19 vaccine sales.
Operational constant-currency sales are expected to increase in the range of 8.5%-9.0% compared with the prior expectation of 7.5%-8.5%. J&J expects a 1% negative impact from foreign currency translation on reported sales for 2023 as the dollar has strengthened against most currencies.
Adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth is now expected to be in the range of 7.2%-7.7% (prior expectation of 6.2%-7.2%).
The adjusted earnings per share guidance was widened from a range of $10.00-$10.10 to $10.07-$10.13. The earnings range implies growth in the range of 12.7%-13.3% compared with 12 expected previously.
On an operational, constant-currency basis, adjusted earnings per share are expected to increase 12.2%-12.8% versus the prior expectation of 11.
Adjusted pretax operating margins are expected to improve by approximately 50 basis points from 2022 levels, driven by strong margin profile and business mix.
Other income is expected to be in the range of $1.7 billion to $1.9 billion (maintained). Net interest income is expected in the range of $300 million to $400 million versus $100 to $200 million previously.
Adjusted tax rate guidance was lowered to a range of 15.0% to 15.5% from 15.5% to 16.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Johnson & Johnson has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Johnson & Johnson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Johnson & Johnson (JNJ) Down 2.6% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Johnson & Johnson (JNJ - Free Report) . Shares have lost about 2.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Johnson & Johnson due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Beats Q3 Earnings & Sales Estimates Post Spin-Off
J&J’s third-quarter 2023 earnings came in at $2.66 per share, which beat the Zacks Consensus Estimate of $2.52. Earnings rose 19.3% from the year-ago period.
Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported third-quarter earnings of $1.69 per share, up 4.3% from the year-ago quarter.
Sales were $21.35 billion, beating the Zacks Consensus Estimate of $21.00 billion. Sales rose 6.8% from the year-ago quarter, reflecting an operational increase of 6.4% and a positive currency impact of 0.4%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 4.9% on an operational basis.
Third-quarter sales in the domestic market rose 11.1% to $12.0 billion. International sales rose 1.6% on a reported basis to $9.36 billion, reflecting an operational increase of 0.7% and a positive currency impact of 0.9%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 0.3% in the quarter.
In the third quarter, J&J presented its Consumer Health business as discontinued operations in its financial statements and recorded a one-time non-cash gain of approximately $21 billion in the quarter.
Segment Details
Sales in J&J’s Innovative Medicines segment (previously the Pharmaceutical segment) rose 5.1% year over year to $13.89 billion, reflecting a 4.3% operational increase and a 0.8% positive currency impact. Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 4.4%. Innovative Medicines sales beat the Zacks Consensus Estimate of $13.37 billion as well as our model estimate of $13.27 billion. Excluding sales from J&J’s COVID-19 vaccine, operational sales grew 8.2%.
In Innovative Medicines segment, sales in the United States rose 10.9% while that outside the United States declined 2.3%.
Higher sales of key products such as Darzalex, Stelara, Tremfya and Erleada drove the segment’s growth. New drugs like Carvykti and Spravato also contributed to growth. The sales growth was dampened by lower sales of Imbruvica, COVID vaccine and generic/biosimilar competition to drugs like Zytiga and Remicade.
Darzalex sales rose 21.8% year over year to $2.5 billion in the quarter, driven by continued share gains and market growth. Sales, however, slightly missed the Zacks Consensus Estimate of $2.54 billion and our model estimate of $2.57 billion.
Stelara sales grew 16.9% to $2.86 billion in the quarter driven by strong market growth and a favorable patient mix. Stelara sales beat the Zacks Consensus Estimate of $2.64 billion and our model estimate of $2.65 billion.
In May, J&J settled its litigation with Amgen, as a result of which J&J does not anticipate the launch of a biosimilar version of Stelara until January 2025. J&J, on the conference call, said Stelara biosimilars are not expected to be launched in 2024.
Imbruvica sales declined 11.3% to $808.0 million. Rising competitive pressure in the United States due to new oral competition has been hurting sales of Imbruvica for the past few quarters. Imbruvica sales were however better than the Zacks Consensus Estimate of $771.0 million and our estimate of $759.0 million.
Erleada generated sales of $631 million in the quarter, up 28.7% year over year, driven by continued share gains and market growth. Erleada sales beat our model estimate of $614.3 million. Tremfya recorded sales of $891 million in the quarter, up 22.2% year over year driven by strong market growth and a favorable patient mix. Tremfya beat the Zacks Consensus Estimate of $801 million as well as our model estimate of $867.9 million.
New drug Carvykti, recorded sales of $152 million compared with $117 million in the previous quarter driven by the ongoing launch, share gains and capacity improvement. New drug Spravato recorded sales of $183.0 million compared with $169.0 million in the previous quarter. J&J expects to begin disclosing Tecvayli sales from the first quarter of 2024 which is now included in Other Oncology.
PAH revenues of $954 million rose 12% year over year. In PAH, Uptravi sales rose 20.74% to $402 million.
Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales declined 0.2% to $1.03 billion in the quarter. Simponi/Simponi Aria sales rose 15.3% to $629.0 million, while Prezista sales declined 7.8% to $447 million. Xarelto sales declined 9.4% in the quarter to $625 million.
Zytiga sales declined 53% to $214.0 million in the quarter due to generic competition. Sales of Remicade were down 17.4% in the quarter to $461 million.
J&J’s single-dose COVID-19 vaccine generated sales of $41 million in the quarter, down 91.5% year over year. International sales accounted for all COVID-19 vaccine sales.
In 2024, J&J expects key products like Darzalex, Tremfya, Erleada, Invega Sustenna and Uptravi and rapid progress of new products to drive growth in the Innovative Medicines segment.
MedTech segment sales came in at $7.46 billion, up 10% from the year-ago period, as an operational increase of 10.4% was offset by a negative currency movement of 0.4%. MedTech segment sales missed the Zacks Consensus Estimate of $7.59 billion as well as our model estimate of $7.70 billion.
In the MedTech segment, sales rose 11.6% in the United States and 8.3% outside of the United States
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 6%. Abiomed, acquired last year, contributed 4.6% to sales growth.
Sales in the MedTech businesses continued to benefit from strong procedure recovery and new products, which were partially offset by international sanctions in Russia, volume-based procurement (VBP) issues in China and supply challenges in some categories.
Interventional Solutions grew 47.0%, driven by strong sales growth of electrophysiology products, including Europe. In Surgery, Advanced Surgery rose 0.5% while General Surgery rose 4.0% worldwide. Worldwide orthopedics rose 3.4%, driven by strong procedure recovery and successfully launched new products, partially offset by the impact of the VBP program in China (in spine and trauma). Worldwide Vision rose 4.2%, driven by price increases and new products, which were partially offset due to the Blink divestiture.
In 2024, in the MedTech segment, J&J expects its commercial capabilities and continued uptake from recently launched products to drive sales, The worldwide procedure volumes in 2024 are expected to remain similar to 2023 levels, which benefited from the post-pandemic recovery. In 2024, J&J expects overall MedTech market procedure to grow in the range of 5-7% versus the traditional range of 4-6%.
2023 Guidance Upped
In August, J&J provided updated financial guidance for 2023, following the complete separation of Kenvue. Along with its third-quarter results, J&J raised its full-year guidance for adjusted earnings and sales growth.
J&J now expects revenues in the range of $83.6 billion-$84.0 billion compared with the earlier expectation of $83.2 billion-$84.0 billion. Revenue growth is now expected in the range of 7.5 versus the prior expectation of 7. All revenue figures exclude any revenues from COVID-19 vaccine sales.
Operational constant-currency sales are expected to increase in the range of 8.5%-9.0% compared with the prior expectation of 7.5%-8.5%. J&J expects a 1% negative impact from foreign currency translation on reported sales for 2023 as the dollar has strengthened against most currencies.
Adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth is now expected to be in the range of 7.2%-7.7% (prior expectation of 6.2%-7.2%).
The adjusted earnings per share guidance was widened from a range of $10.00-$10.10 to $10.07-$10.13. The earnings range implies growth in the range of 12.7%-13.3% compared with 12 expected previously.
On an operational, constant-currency basis, adjusted earnings per share are expected to increase 12.2%-12.8% versus the prior expectation of 11.
Adjusted pretax operating margins are expected to improve by approximately 50 basis points from 2022 levels, driven by strong margin profile and business mix.
Other income is expected to be in the range of $1.7 billion to $1.9 billion (maintained). Net interest income is expected in the range of $300 million to $400 million versus $100 to $200 million previously.
Adjusted tax rate guidance was lowered to a range of 15.0% to 15.5% from 15.5% to 16.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Johnson & Johnson has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Johnson & Johnson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.