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J&J (JNJ) Stock Gains on Q2 Earnings and Improved Outlook

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Johnson & Johnson’s (JNJ - Free Report) shares are up in pre-market trading with the company beating earnings expectations yet again. Moreover, the company has raised its earnings outlook for the year again.

J&J’s second-quarter 2016 earnings came in at $1.74 per share, beating the Zacks Consensus Estimate of $1.67 per share and increasing 1.8% from the year-ago period.

Johnson & Johnson (JNJ - Free Report) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Sales also surpassed expectations coming in at $18.5 billion -- the Zacks Consensus Estimate was $17.9 billion. Sales increased 3.9% from the year-ago quarter, reflecting an operational increase of 5.3% and negative currency impact of 1.4%.

Second quarter sales grew 7.4% in the domestic market and 0.4% in international markets, reflecting 3.1% operational growth partially offset by 2.7% negative currency impact.

Including one-time items, Johnson & Johnson reported second quarter earnings of $1.43 per share, down 11.2% from the year-ago period.
 
Pharma Segment Delivers Again

J&J’s pharmaceutical segment once again drove results with new as well as core products performing well. Pharma segment sales grew 8.9% year-over-year to $8.7 billion (negative currency impact of 0.8%). Sales in the domestic market increased 13.2% to $5.1 billion, while international sales grew 3.1% to $3.5 billion.

New products like Stelara and Invega Sustenna continued to perform well. Other growth drivers include Invokana/Invokamet, Imbruvica, Remicade, Xarelto, Darzalex, Zytiga and Simponi.

Hepatitis C virus (HCV) treatment Olysio continued to feel the impact of additional competition with sales declining 83.7% from the year-ago quarter. Invega sales also declined due to generic competition.

J&J’s pharma segment also achieved some clinical milestones during the quarter including label expansion for products like Invokamet, Imbruvica and Simponi as well as conditional approval for Darzalex in the EU.

The Medical Devices segment clocked an improvement this quarter with sales coming in at $6.4 billion, up 0.8% from the year-ago period comprising an operational increase of 1.8% and negative currency movement of 1.0%.

Sales in the domestic market grew 1.0% year-over year to $3 billion; international market sales inched up 0.6% year-over-year to $3.4 billion.

Operational growth was driven by endocutters, energy and biosurgical products in the Advanced Surgery business; electrophysiology products in the Cardiovascular business; joint reconstruction  and U.S. trauma products in the Orthopedics business; and Acuvue contact lenses in the Vision Care business.

The company is working on driving growth in the Medical Devices segment through new product launches and by transforming its commercial models.

The Consumer segment recorded revenues of $3.4 billion in the reported quarter, down 1.8% from the second quarter of 2015. Foreign currency movement negatively impacted sales in the segment by 3.3%. Sales in the domestic market grew 2.1% from the year-ago period to $1.4 billion.

Meanwhile, the international segment recorded a decline of 4.4% with currency having a negative impact of 5.4%. Products that performed well include Neutrogena and Aveeno skin care products; OTC products including Tylenol and Motrin analgesics, digestive health products and international anti-smoking aids; and Listerine oral care products.

Ups Earnings Guidance Again

J&J now expects 2016 earnings in the range of $6.63 - $6.73 per share on revenues of $71.5 billion - $72.2 billion. At the time of releasing first quarter results, the company had guided towards earnings of $6.53 - $6.68 per share on revenues of $71.2 billion to $71.9 billion.

The Zacks Consensus Estimate for earnings and revenues is $6.60 per share and $71.6 billion, respectively.

Our Take

Johnson & Johnson delivered another strong quarter with both earnings and revenues surpassing expectations. The Pharmaceutical segment continues to perform well despite challenges like generic competition for a few products, negative currency impact and lower HCV revenues.

J&J also raised its outlook for the year. Contribution from new products, share buybacks and the restructuring initiative should help drive results.

Johnson & Johnson is a Zacks Rank #2 (Buy) stock. Some other equally well-ranked stocks in the large cap pharma sector include Pfizer Inc. (PFE - Free Report) and H. Lundbeck A/S while Bristol-Myers Squibb Company (BMY - Free Report) is a Zacks Rank #1 (Strong Buy) stock.

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