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Why Is Johnson & Johnson (JNJ) Up 2.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Johnson & Johnson (JNJ - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Johnson & Johnson due for a pullback? 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.
J&J’s second-quarter 2024 earnings came in at $2.82 per share, which beat the Zacks Consensus Estimate of $2.71. Earnings rose 10.2% from the year-ago period.
Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported second-quarter earnings of $1.93 per share, down 5.9% year over year.
Sales came in at $22.45 billion, which beat the Zacks Consensus Estimate of $22.35 billion. Sales rose 4.3% from the year-ago quarter, reflecting an operational increase of 6.6% and a negative currency impact of 2.3%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 6.5% on an operational basis. Excluding sales of COVID-19 vaccine, organic sales rose 7.1%.
Second-quarter sales in the domestic market rose 7.8% to $12.57 billion. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, domestic sales rose 7.6% in the quarter.
International sales rose 0.2% on a reported basis to $9.88 billion, reflecting an operational decrease of 5.1% and a negative currency impact of 4.9%. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, international sales rose 5.3% in the quarter.
Segment Details
Sales in the Innovative Medicines segment (previously the Pharmaceutical segment) rose 5.5% year over year to $14.49 billion, reflecting a 7.8% operational increase and a 2.3% negative currency impact. Excluding the impact of all acquisitions and divestitures and currency on an adjusted operational basis, worldwide sales rose 8%. Excluding sales of COVID-19 vaccine, organic sales rose 8.8%. Innovative Medicines sales beat the Zacks Consensus Estimate of $14.13 billion as well as our model estimate of $14.0 billion.
Higher sales of key products such as Darzalex, Stelara, Tremfya, Uptravi and Erleada drove the segment’s growth. New drugs like Carvykti, Tecvayli and Spravato also contributed to growth. The sales growth was partially dampened by lower sales of Imbruvica, COVID-19 vaccine and generic/biosimilar competition to drugs like Zytiga and Remicade.
In the Innovative Medicines segment, sales in the United States rose 8.9%, while outside U.S. sales rose 6.4% on an operational basis.
Darzalex sales rose 18.4% year over year to $2.88 billion in the quarter, driven by continued share gains across all lines of therapy, particularly the front-line setting, as well as market growth. Sales slightly missed the Zacks Consensus Estimate of $2.89 billion and our model estimate of $2.97 billion.
Stelara sales grew 3.1% to $2.89 billion in the quarter, driven by market growth, which was partially offset by unfavorable patient mix. Stelara sales beat the Zacks Consensus Estimate of $2.78 billion and our model estimate of $2.76 billion. With expected biosimilar entry in 2025, continued volume growth is expected to be largely offset by price declines. In Europe, a biosimilar is expected to be launched by the end of July.
Imbruvica sales declined 8.5% to $770.0 million due to rising competitive pressure in the United States due to new oral competition. Imbruvica sales were, however, better than the Zacks Consensus Estimate of $737.0 million and our estimate of $744.2 million.
Erleada generated sales of $736 million in the quarter, up 29.8% year over year, driven by share gains and market growth. Erleada sales beat the Zacks Consensus Estimate of $692.0 million as well as our model estimate of $682.5 million.
Tremfya recorded sales of $906 million in the quarter, up 28.3% year over year, driven by strong market growth, share gains and favorable patient mix. Tremfya sales beat the Zacks Consensus Estimate of $871.0 million as well as our model estimate of $838.9 million.
New drug Carvykti recorded sales of $186 million, up 59.8% year over year, driven by increased demand. Another new drug, Tecvayli, recorded sales of $135 million in the quarter, up 42.9% year over year, driven by demand growth. However. sequential growth slowed due to the adoption of recently approved longer-duration dosing intervals.
Spravato recorded sales of $271.0 million, up 60.2% year over year.
PAH drug Uptravi recorded sales of $426.0 million, up 6.6% year over year, driven by share gains and market growth, which was partially offset by inventory dynamics. Xarelto sales declined 7.9% in the quarter to $587 million due to an unfavorable patient mix.
Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales rose 2.2% to $1.05 billion in the quarter. Simponi/Simponi Aria sales rose 1.6% to $537.0 million, while Prezista sales declined 11% to $438.0 million.
Zytiga sales declined 27.7% to $165.0 million in the quarter due to generic competition. Sales of Remicade declined 14.9% in the quarter to $393 million.
J&J’s single-dose COVID-19 vaccine generated sales of $172 million in the quarter, down 39.7% year over year. International sales accounted for all COVID-19 vaccine sales.
In 2024, J&J expects to record above-market growth in the Innovative Medicine unit for the 13th consecutive year. The growth is expected to be driven by market share gains for key products like Darzalex, Tremfya and Erleada and rapid adoption of new products such as Carvykti, Tecvayli, Talvey and Spravato. J&J does not expect any future sales from the COVID-19 vaccine. Innovative Medicine sales growth is expected to be slightly lower in the second half of the year compared to the first half due to the potential entry of Stelara biosimilars in Europe in the last week of July. Distribution rights for Remicade and Simponi in Europe will be returned in the fourth quarter, resulting in limited sales of these drugs in the third quarter.
MedTech segment sales came in at $7.96 billion, up 2.2% from the year-ago period, as an operational increase of 4.4% was offset by a negative currency movement of 2.2%. MedTech segment sales missed the Zacks Consensus Estimate of $8.22 billion as well as our model estimate of $8.21 billion.
Excluding the impact of all acquisitions and divestitures, and currency, on an adjusted operational basis, worldwide sales rose 4%.
In the MedTech segment, sales rose 5.7% in the United States and 3.2% outside of the United States on an operational basis.
Sales in the MedTech business were driven by strong global procedure growth, new product uptake and commercial execution, which were partially offset by a weaker performance in China and competitive pressure in U.S. distributor stocking dynamics and the Vision category. Sales in China were hurt by the impact of the volume-based procurement (VBP) program, the anti-corruption campaign and a difficult comparison to the year-ago quarter. VBP is a government-driven cost containment effort in China.
Cardiovascular (previously Interventional Solutions) sales grew 15.6%, driven by growth of electrophysiology products in all regions and higher sales of Abiomed. Worldwide Surgery declined 4.1% due to competitive pressure in energy and Endocutters, VBP issues in China and unfavorable tender timing in EMEA markets, partially offset by the strength of new products. Worldwide orthopedics rose 2.1%, driven by a solid performance in hips and knees on strong procedure recovery and growth in new products. Spine, sports and others segment was negatively impacted by competitive pressures and VBP issues in China. Worldwide Vision declined 1.7% due to U.S. distributor stocking dynamics and competitive pressures.
In the second quarter, J&J’s MedTech growth fell below its expectations of growing at the upper end of expected market growth of 5-7%. J&J expects growth to accelerate in the second half of the year, J&J expects MedTech growth closer to 6% for 2024, lower than the prior expectation of growing at the upper end of the market growth expectation of 5-7%.
In 2024, in the MedTech segment, J&J expects operational sales growth to accelerate in the second half of the year supported by a recovery in contact lenses, further expansion into high-growth segments, including the integration of Shockwave, and continued expansion of new products.
2024 Outlook
While J&J maintained its total revenue expectation, it lowered its previously issued earnings growth expectation for 2024. The company’s expectation of a better operational performance was offset by costs associated with recent acquisitions.
Total revenues are expected in the range of $88.0 billion-$88.4 billion for 2024. The sales range indicates growth in the range of 4.7%-5.2%. Operational sales growth is expected in the range of 6.1%-6.6%, compared with 5.5 expected previously.
The adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth guidance was maintained in the range of 5.5.
The revenue figures exclude revenues from COVID-19 vaccine sales.
However, the earnings guidance was lowered to account for the financing costs associated with recent acquisitions of medical device company Shockwave Medical (closed in May) and private biotech Proteologix (closed in June).
The adjusted earnings per share guidance was lowered from a range of $10.57-$10.72 per share to $9.97-$10.07 per share. The earnings range implies growth in the range of 0.5%-1.5% (6.6%-8.1% expected previously).
On an operational, constant-currency basis, adjusted earnings per share are expected to increase in the range of 0.8%-1.8% (previously 6.9%-8.4%).
Adjusted operating margin is expected to be lower in the second half compared to the first half of the year.
Adjusted pretax operating margin is expected to decline 120 bps compared to the prior expectation of improving by approximately 50 basis points from 2023.
Other income is expected to be in the range of $1.5 billion to $1.7 billion versus $1.2 billion to $1.4 billion previously. Net interest income is expected in the range of $300 million to $400 million compared with $550 million to $650 million expected previously. The guidance was lowered to account for the interest expenses associated with the recent acquisitions.
The adjusted tax rate is expected in the range of 17.5%-18.5% compared with 16.0%-17.5% previously.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -13.8% due to these changes.
VGM Scores
Currently, Johnson & Johnson has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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. It's no surprise Johnson & Johnson has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Johnson & Johnson (JNJ) Up 2.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Johnson & Johnson (JNJ - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Johnson & Johnson due for a pullback? 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.
Q2 Earnings & Sales Top, EPS Guidance Cut on M&A Costs
J&J’s second-quarter 2024 earnings came in at $2.82 per share, which beat the Zacks Consensus Estimate of $2.71. Earnings rose 10.2% from the year-ago period.
Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported second-quarter earnings of $1.93 per share, down 5.9% year over year.
Sales came in at $22.45 billion, which beat the Zacks Consensus Estimate of $22.35 billion. Sales rose 4.3% from the year-ago quarter, reflecting an operational increase of 6.6% and a negative currency impact of 2.3%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 6.5% on an operational basis. Excluding sales of COVID-19 vaccine, organic sales rose 7.1%.
Second-quarter sales in the domestic market rose 7.8% to $12.57 billion. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, domestic sales rose 7.6% in the quarter.
International sales rose 0.2% on a reported basis to $9.88 billion, reflecting an operational decrease of 5.1% and a negative currency impact of 4.9%. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, international sales rose 5.3% in the quarter.
Segment Details
Sales in the Innovative Medicines segment (previously the Pharmaceutical segment) rose 5.5% year over year to $14.49 billion, reflecting a 7.8% operational increase and a 2.3% negative currency impact. Excluding the impact of all acquisitions and divestitures and currency on an adjusted operational basis, worldwide sales rose 8%. Excluding sales of COVID-19 vaccine, organic sales rose 8.8%. Innovative Medicines sales beat the Zacks Consensus Estimate of $14.13 billion as well as our model estimate of $14.0 billion.
Higher sales of key products such as Darzalex, Stelara, Tremfya, Uptravi and Erleada drove the segment’s growth. New drugs like Carvykti, Tecvayli and Spravato also contributed to growth. The sales growth was partially dampened by lower sales of Imbruvica, COVID-19 vaccine and generic/biosimilar competition to drugs like Zytiga and Remicade.
In the Innovative Medicines segment, sales in the United States rose 8.9%, while outside U.S. sales rose 6.4% on an operational basis.
Darzalex sales rose 18.4% year over year to $2.88 billion in the quarter, driven by continued share gains across all lines of therapy, particularly the front-line setting, as well as market growth. Sales slightly missed the Zacks Consensus Estimate of $2.89 billion and our model estimate of $2.97 billion.
Stelara sales grew 3.1% to $2.89 billion in the quarter, driven by market growth, which was partially offset by unfavorable patient mix. Stelara sales beat the Zacks Consensus Estimate of $2.78 billion and our model estimate of $2.76 billion. With expected biosimilar entry in 2025, continued volume growth is expected to be largely offset by price declines. In Europe, a biosimilar is expected to be launched by the end of July.
Imbruvica sales declined 8.5% to $770.0 million due to rising competitive pressure in the United States due to new oral competition. Imbruvica sales were, however, better than the Zacks Consensus Estimate of $737.0 million and our estimate of $744.2 million.
Erleada generated sales of $736 million in the quarter, up 29.8% year over year, driven by share gains and market growth. Erleada sales beat the Zacks Consensus Estimate of $692.0 million as well as our model estimate of $682.5 million.
Tremfya recorded sales of $906 million in the quarter, up 28.3% year over year, driven by strong market growth, share gains and favorable patient mix. Tremfya sales beat the Zacks Consensus Estimate of $871.0 million as well as our model estimate of $838.9 million.
New drug Carvykti recorded sales of $186 million, up 59.8% year over year, driven by increased demand. Another new drug, Tecvayli, recorded sales of $135 million in the quarter, up 42.9% year over year, driven by demand growth. However. sequential growth slowed due to the adoption of recently approved longer-duration dosing intervals.
Spravato recorded sales of $271.0 million, up 60.2% year over year.
PAH drug Uptravi recorded sales of $426.0 million, up 6.6% year over year, driven by share gains and market growth, which was partially offset by inventory dynamics. Xarelto sales declined 7.9% in the quarter to $587 million due to an unfavorable patient mix.
Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales rose 2.2% to $1.05 billion in the quarter. Simponi/Simponi Aria sales rose 1.6% to $537.0 million, while Prezista sales declined 11% to $438.0 million.
Zytiga sales declined 27.7% to $165.0 million in the quarter due to generic competition. Sales of Remicade declined 14.9% in the quarter to $393 million.
J&J’s single-dose COVID-19 vaccine generated sales of $172 million in the quarter, down 39.7% year over year. International sales accounted for all COVID-19 vaccine sales.
In 2024, J&J expects to record above-market growth in the Innovative Medicine unit for the 13th consecutive year. The growth is expected to be driven by market share gains for key products like Darzalex, Tremfya and Erleada and rapid adoption of new products such as Carvykti, Tecvayli, Talvey and Spravato. J&J does not expect any future sales from the COVID-19 vaccine. Innovative Medicine sales growth is expected to be slightly lower in the second half of the year compared to the first half due to the potential entry of Stelara biosimilars in Europe in the last week of July. Distribution rights for Remicade and Simponi in Europe will be returned in the fourth quarter, resulting in limited sales of these drugs in the third quarter.
MedTech segment sales came in at $7.96 billion, up 2.2% from the year-ago period, as an operational increase of 4.4% was offset by a negative currency movement of 2.2%. MedTech segment sales missed the Zacks Consensus Estimate of $8.22 billion as well as our model estimate of $8.21 billion.
Excluding the impact of all acquisitions and divestitures, and currency, on an adjusted operational basis, worldwide sales rose 4%.
In the MedTech segment, sales rose 5.7% in the United States and 3.2% outside of the United States on an operational basis.
Sales in the MedTech business were driven by strong global procedure growth, new product uptake and commercial execution, which were partially offset by a weaker performance in China and competitive pressure in U.S. distributor stocking dynamics and the Vision category. Sales in China were hurt by the impact of the volume-based procurement (VBP) program, the anti-corruption campaign and a difficult comparison to the year-ago quarter. VBP is a government-driven cost containment effort in China.
Cardiovascular (previously Interventional Solutions) sales grew 15.6%, driven by growth of electrophysiology products in all regions and higher sales of Abiomed. Worldwide Surgery declined 4.1% due to competitive pressure in energy and Endocutters, VBP issues in China and unfavorable tender timing in EMEA markets, partially offset by the strength of new products. Worldwide orthopedics rose 2.1%, driven by a solid performance in hips and knees on strong procedure recovery and growth in new products. Spine, sports and others segment was negatively impacted by competitive pressures and VBP issues in China. Worldwide Vision declined 1.7% due to U.S. distributor stocking dynamics and competitive pressures.
In the second quarter, J&J’s MedTech growth fell below its expectations of growing at the upper end of expected market growth of 5-7%. J&J expects growth to accelerate in the second half of the year, J&J expects MedTech growth closer to 6% for 2024, lower than the prior expectation of growing at the upper end of the market growth expectation of 5-7%.
In 2024, in the MedTech segment, J&J expects operational sales growth to accelerate in the second half of the year supported by a recovery in contact lenses, further expansion into high-growth segments, including the integration of Shockwave, and continued expansion of new products.
2024 Outlook
While J&J maintained its total revenue expectation, it lowered its previously issued earnings growth expectation for 2024. The company’s expectation of a better operational performance was offset by costs associated with recent acquisitions.
Total revenues are expected in the range of $88.0 billion-$88.4 billion for 2024. The sales range indicates growth in the range of 4.7%-5.2%. Operational sales growth is expected in the range of 6.1%-6.6%, compared with 5.5 expected previously.
The adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth guidance was maintained in the range of 5.5.
The revenue figures exclude revenues from COVID-19 vaccine sales.
However, the earnings guidance was lowered to account for the financing costs associated with recent acquisitions of medical device company Shockwave Medical (closed in May) and private biotech Proteologix (closed in June).
The adjusted earnings per share guidance was lowered from a range of $10.57-$10.72 per share to $9.97-$10.07 per share. The earnings range implies growth in the range of 0.5%-1.5% (6.6%-8.1% expected previously).
On an operational, constant-currency basis, adjusted earnings per share are expected to increase in the range of 0.8%-1.8% (previously 6.9%-8.4%).
Adjusted operating margin is expected to be lower in the second half compared to the first half of the year.
Adjusted pretax operating margin is expected to decline 120 bps compared to the prior expectation of improving by approximately 50 basis points from 2023.
Other income is expected to be in the range of $1.5 billion to $1.7 billion versus $1.2 billion to $1.4 billion previously. Net interest income is expected in the range of $300 million to $400 million compared with $550 million to $650 million expected previously. The guidance was lowered to account for the interest expenses associated with the recent acquisitions.
The adjusted tax rate is expected in the range of 17.5%-18.5% compared with 16.0%-17.5% previously.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -13.8% due to these changes.
VGM Scores
Currently, Johnson & Johnson has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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. It's no surprise Johnson & Johnson has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.