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Johnson & Johnson (JNJ - Free Report) started third-quarter pharma earnings on a strong note by beating the Zacks Consensus Estimate on both counts. The drug and consumer products giant upped its previously issued sales and earnings guidance for 2018. Shares were up marginally in pre-market trading.
This year so far, J&J’s shares have declined 4.1% against a 3.3% increase witnessed by the industry.
Earnings Beat
J&J’s third-quarter 2018 earnings came in at $2.05 per share, beating the Zacks Consensus Estimate of $2.03 and increasing 7.9% from the year-ago period.
Adjusted earnings excluded amortization expense and some special items. Including these items, J&J reported third-quarter earnings of $1.44 per share, up 5.1% year over year.
Sales Beat
Sales came in at $20.3 billion, beating the Zacks Consensus Estimate of $19.91 billion. Sales also increased 3.6% from the year-ago quarter, reflecting an operational increase of 5.5% and an unfavorable currency impact of 1.9%.
Organically, excluding the impact of acquisitions and divestitures, sales increased 6.1% on an operational basis, slightly lower than 6.3% increase seen in the second quarter. The rise in the quarter was due to the year-over-year growth in the Pharmaceutical segment and continued improved performance in the Medical Devices segment. The Consumer unit also grew in the quarter after lagging in the second quarter.
Third-quarter sales grew 3.6% in the domestic market to $10.66 billion and 3.6% in international markets to $9.68 billion, reflecting 7.5% operational growth and 4% negative currency impact.
Sales in Details
Pharmaceutical segment sales rose 6.7% year over year to $10.3 billion, reflecting 8.2% operational growth and 1.5% negative currency impact as sales rose in both domestic and international markets. Sales in the domestic market rose 4.8% to $6.1 billion. International sales grew 9.5% to $4.25 billion (operational increase of 13.2%).
New products like Imbruvica (cancer) and Darzalex (multiple myeloma) continued to perform well. Core products like Trinza, Uptravi, Stelara, Zytiga, Simponi/Simponi Aria and Invega Sustenna also contributed to growth. Please note that J&J markets Imbruvica in partnership with AbbVie, Inc. (ABBV - Free Report) .
The impact of acquisitions and divestitures on sales was negligible this quarter. The improved performance was led by the company’s oncology portfolio. Worldwide sales of J&J’s cancer drugs rose 36.4% in the quarter.
In the quarter, J&J recorded pulmonary arterial hypertension (PAH) revenues of $656 million, lower than $665 million in the previous quarter. However, it has grown year over year. The $30 billion acquisition of Swiss biotech, Actelion in June last year diversified J&J’s revenues to the PAH category and added 3.8% to sales growth in the quarter.
However, sales of Invokana/Invokamet continued to decline and fell 28.3% due to higher managed care discounting and loss of market share due to competitive pressure.
Importantly, sales of the blockbuster rheumatoid arthritis drug, Remicade, marketed in partnership with Merck & Co., Inc. (MRK - Free Report) , were down 16.3% in the quarter with U.S. sales declining 18.2% and U.S. exports going down by 35.9% due to biosimilar competition. However, Remicade sales rose 2.5% in international markets, which includes an unfavorable currency movement of 5.7%.
Medical Devices segment sales came in at $6.59 billion, down 0.2% from the year-ago period. It included an operational increase of 1.7% and negative currency movement of 1.9%.
Domestic market sales rose 0.3% year over year to $3.2 billion. International market sales decreased 0.6% (operational increase of 3%) year over year to $3.4 billion.
The Consumer segment recorded revenues of $3.4 billion in the reported quarter, up 1.8% year over year. Moreover, on an operational basis, Consumer segment sales increased 4.9%, partially offset by unfavorable foreign currency movement of 3.1%. Sales in the domestic market rose 6.6% from the year-ago period to $1.4 billion.
Meanwhile, the international segment recorded a decline of 1.3% to $2.04 billion. The operational increase of 3.7% was offset by negative currency impact of 5% in the quarter.
2018 Guidance Raised
J&J raised its previously issued earnings and sales guidance for 2018.
J&J expects 2018 adjusted earnings per share in the range of $8.13 - $8.18 compared with $8.07 - $8.17 expected previously. The guidance range reflects an operational growth rate between 9.3% and 10% (previously 8.5% and 9.9%).
Revenues are expected in the range of $81 to $81.4 billion, higher than previously expected $80.5 to $81.3 billion, reflecting operational constant currency sales growth rate in the range of 5.5% to 6% (previously 4.5% to 5.5%).
Our Take
Though quite a few key products in J&J’s portfolio like Remicade and Concerta face generic competition, we believe that new products like plaque psoriasis drug, Tremfya (guselkumab), successful label expansion of cancer drugs like Imbruvica, Darzalex and Zytiga and contribution from acquisitions helped J&J deliver strong sales and profit in the third quarter of the year. In fact, J&J is quite confident that its Pharma segment will continue to perform better than the market through this year despite the impact of biosimilars on Remicade sales. However, currency headwinds will be a concern.
J&J has announced a few positive news lately with successful completion of two late-stage studies and submission of two new drug applications for esketamine and erdafitinib to the FDA. Moreover, a label expansion of Xarelto was approved earlier this week. The company is also planning to appeal against the jury’s order to pay $4.69 billion in damages in talc-case.
Another top-ranked pharma stock is Bristol-Myers Squibb Company (BMY - Free Report) , carrying a Zacks Rank #1. Shares of Bristol-Myers have gained 10% in the past six months.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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J&J (JNJ) Beats Earnings & Sales Estimates in Q3, Ups View
Johnson & Johnson (JNJ - Free Report) started third-quarter pharma earnings on a strong note by beating the Zacks Consensus Estimate on both counts. The drug and consumer products giant upped its previously issued sales and earnings guidance for 2018. Shares were up marginally in pre-market trading.
This year so far, J&J’s shares have declined 4.1% against a 3.3% increase witnessed by the industry.
Earnings Beat
J&J’s third-quarter 2018 earnings came in at $2.05 per share, beating the Zacks Consensus Estimate of $2.03 and increasing 7.9% from the year-ago period.
Adjusted earnings excluded amortization expense and some special items. Including these items, J&J reported third-quarter earnings of $1.44 per share, up 5.1% year over year.
Sales Beat
Sales came in at $20.3 billion, beating the Zacks Consensus Estimate of $19.91 billion. Sales also increased 3.6% from the year-ago quarter, reflecting an operational increase of 5.5% and an unfavorable currency impact of 1.9%.
Organically, excluding the impact of acquisitions and divestitures, sales increased 6.1% on an operational basis, slightly lower than 6.3% increase seen in the second quarter. The rise in the quarter was due to the year-over-year growth in the Pharmaceutical segment and continued improved performance in the Medical Devices segment. The Consumer unit also grew in the quarter after lagging in the second quarter.
Third-quarter sales grew 3.6% in the domestic market to $10.66 billion and 3.6% in international markets to $9.68 billion, reflecting 7.5% operational growth and 4% negative currency impact.
Sales in Details
Pharmaceutical segment sales rose 6.7% year over year to $10.3 billion, reflecting 8.2% operational growth and 1.5% negative currency impact as sales rose in both domestic and international markets. Sales in the domestic market rose 4.8% to $6.1 billion. International sales grew 9.5% to $4.25 billion (operational increase of 13.2%).
New products like Imbruvica (cancer) and Darzalex (multiple myeloma) continued to perform well. Core products like Trinza, Uptravi, Stelara, Zytiga, Simponi/Simponi Aria and Invega Sustenna also contributed to growth. Please note that J&J markets Imbruvica in partnership with AbbVie, Inc. (ABBV - Free Report) .
The impact of acquisitions and divestitures on sales was negligible this quarter. The improved performance was led by the company’s oncology portfolio. Worldwide sales of J&J’s cancer drugs rose 36.4% in the quarter.
In the quarter, J&J recorded pulmonary arterial hypertension (PAH) revenues of $656 million, lower than $665 million in the previous quarter. However, it has grown year over year. The $30 billion acquisition of Swiss biotech, Actelion in June last year diversified J&J’s revenues to the PAH category and added 3.8% to sales growth in the quarter.
However, sales of Invokana/Invokamet continued to decline and fell 28.3% due to higher managed care discounting and loss of market share due to competitive pressure.
Importantly, sales of the blockbuster rheumatoid arthritis drug, Remicade, marketed in partnership with Merck & Co., Inc. (MRK - Free Report) , were down 16.3% in the quarter with U.S. sales declining 18.2% and U.S. exports going down by 35.9% due to biosimilar competition. However, Remicade sales rose 2.5% in international markets, which includes an unfavorable currency movement of 5.7%.
Medical Devices segment sales came in at $6.59 billion, down 0.2% from the year-ago period. It included an operational increase of 1.7% and negative currency movement of 1.9%.
Domestic market sales rose 0.3% year over year to $3.2 billion. International market sales decreased 0.6% (operational increase of 3%) year over year to $3.4 billion.
The Consumer segment recorded revenues of $3.4 billion in the reported quarter, up 1.8% year over year. Moreover, on an operational basis, Consumer segment sales increased 4.9%, partially offset by unfavorable foreign currency movement of 3.1%. Sales in the domestic market rose 6.6% from the year-ago period to $1.4 billion.
Meanwhile, the international segment recorded a decline of 1.3% to $2.04 billion. The operational increase of 3.7% was offset by negative currency impact of 5% in the quarter.
2018 Guidance Raised
J&J raised its previously issued earnings and sales guidance for 2018.
J&J expects 2018 adjusted earnings per share in the range of $8.13 - $8.18 compared with $8.07 - $8.17 expected previously. The guidance range reflects an operational growth rate between 9.3% and 10% (previously 8.5% and 9.9%).
Revenues are expected in the range of $81 to $81.4 billion, higher than previously expected $80.5 to $81.3 billion, reflecting operational constant currency sales growth rate in the range of 5.5% to 6% (previously 4.5% to 5.5%).
Our Take
Though quite a few key products in J&J’s portfolio like Remicade and Concerta face generic competition, we believe that new products like plaque psoriasis drug, Tremfya (guselkumab), successful label expansion of cancer drugs like Imbruvica, Darzalex and Zytiga and contribution from acquisitions helped J&J deliver strong sales and profit in the third quarter of the year. In fact, J&J is quite confident that its Pharma segment will continue to perform better than the market through this year despite the impact of biosimilars on Remicade sales. However, currency headwinds will be a concern.
J&J has announced a few positive news lately with successful completion of two late-stage studies and submission of two new drug applications for esketamine and erdafitinib to the FDA. Moreover, a label expansion of Xarelto was approved earlier this week. The company is also planning to appeal against the jury’s order to pay $4.69 billion in damages in talc-case.
Johnson & Johnson Price
Johnson & Johnson Price | Johnson & Johnson Quote
J&J currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Another top-ranked pharma stock is Bristol-Myers Squibb Company (BMY - Free Report) , carrying a Zacks Rank #1. Shares of Bristol-Myers have gained 10% in the past six months.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>