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Johnson & Johnson’s (JNJ - Free Report) third-quarter 2020 earnings came in at $2.20 per share, which beat the Zacks Consensus Estimate of $1.99. Earnings rose 3.8% from the year-ago period.
Adjusted earnings exclude intangible amortization, restructuring and acquisition-related expenses and some other special items. Including these items, J&J reported third-quarter earnings of $1.33 per share, up 101.5% from the year-ago quarter.
Sales of this drug and consumer products giant came in at $21.08 billion, which beat the Zacks Consensus Estimate of $20.53 billion. Sales rose 1.7% from the year-ago quarter, reflecting an operational increase of 1.7% and no impact of currency.
Organically, excluding the impact of acquisitions and divestitures, sales rose 2.0% on an operational basis in contrast to an 8.8% decrease seen in the second quarter.
Third-quarter sales in the domestic market rose 2.7% to $11.09 billion. International sales rose 0.6%, both on a reported and operational basis, to $10 billion. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 1.1% in the quarter.
Segment Details
Pharmaceutical segment sales rose 5.0% year over year to $11.42 billion, reflecting 4.6% operational growth and 0.4% positive currency impact. Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales increased 4.7%, higher than the 3.9% increase in the second quarter.
The sales increase was led by higher penetration and new indications across key products, such as Darzalex, Imbruvica and Stelara.Other core products like Invega Sustenna, J&J’s pulmonary arterial hypertension (PAH) drugs and new drug Erleada contributed significantly to sales growth.
Moreover, sales of some other key drugs like Xarelto and Invokana/Invokamet have improved after declining in the past few quarters. The sales growth was hurt by generic/biosimilar competition to drugs like Zytiga and Remicade and delayed diagnosis and slower new patient starts for some drugs amid the pandemic.
Darzalex sales rose 43.8% year over year to $1.1 billion in the quarter. Stelara sales grew 14.7% to $1.95 billion in the quarter. Imbruvica sales rose 11.9% to $1.03 billion. J&J markets Imbruvica in partnership with AbbVie (ABBV - Free Report) .
PAH revenues of $749 million rose 14.5% year over year, driven by strong sales growth for Uptravi and Opsumit. Invega Sustenna sales rose 8.8% to $926 million in the quarter. Simponi/Simponi Aria sales grew 0.9% to $592 million and Prezista sales increased 3.5% to $526 million.
Xarelto sales rose 2.9% in the quarter to $630.0 million, while sales of Invokana/Invokamet improved 24.7% to $224.0 million.
Among the new medicines, Erleada generated sales of $206 million in the quarter compared with $170 million in the previous quarter. Tremfya recorded sales of $327 million in the quarter compared with $342 million in the previous quarter.
Zytiga sales declined 20.4% to $590 million in the quarter due to generic competition. Sales of Procrit/Eprex declined 33.3% to $132 million in the quarter due to biosimilar competition. Sales of Remicade were down 18.9% in the quarter to $921 million. J&J markets Remicade in partnership with Merck (MRK - Free Report) .
Medical Devices segment sales came in at $6.15 billion, down 3.6% from the year-ago period, reflecting an operational decrease of 3.9% and a positive currency movement of 0.3%. The pandemic hit this segment the hardest due to a widespread decline in elective surgical procedures and the redeployment of hospital resources to address patients affected by COVID-19. However, the segment was much less affected in the third quarter due to market recovery compared to the second quarter. In the third quarter, J&J expected the Medical Devices unit to decline in the range of 10-25%.
Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales decreased 3.3% compared with a decline of 32.5% in the previous quarter.
The Consumer segment recorded revenues of $3.51 billion in the reported quarter, up 1.3% year over year. On an operational basis, Consumer segment sales rose 3%. Unfavorable foreign currency movement hurt sales by 1.7%.
Excluding the impact of acquisitions and divestitures, adjusted operational sales increase was 3.1% worldwide against a 3.4% decline seen in the previous quarter.
Higher sales of OTC products in the United States like Tylenol, oral care product Listerine mouthwash, OGX in skin health/beauty products and digestive health products were offset by the negative impact of the COVID-19 pandemicon international OTC products.
2020 Guidance Raised
J&J raised its earnings and sales guidance for the second time this year. Adjusted earnings per share expectations were raised from a range of $7.75-$7.95 to $7.95-$8.05. The guidance range now indicates a decline of 7.3-8.4% versus the prior expectation of a decline of 8.4-10.7%. On an operational, constant-currency basis, adjusted earnings per share are expected to decline 7.3-8.4%. The prior expectation was a decline in the range of 7.3-9.6%.
Revenues are now expected to remain flat or decline 1% to $81.2-$82.0 billion. Previous expectation for revenues was in the range of $79.9-$81.4 billion, indicating a year-over-year decline of 0.8-2.6%.
Operational constant-currency sales are expected to be flat to up 1% compared with the prior expectation of an increase of 0.5% to a decline of 1.3%. Adjusted operational sales, (excluding currency impact, acquisitions/divestitures) are expected to be up 0.5-1.5% (previous expectation was down 0.8% to up 1%).
Pause on Coronavirus Vaccine Development
On Monday, J&J paused dosing in all clinical studies on its coronavirus vaccine candidate, JNJ-78436735, including the large pivotal phase III study, ENSEMBLE, which was initiated last month. The halt resulted from an unexplained illness observed in a study participant, which is now being probed by the ENSEMBLE independent Data Safety Monitoring Board (DSMB) and also J&J’s own internal physicians.
J&J initiated ENSEMBLE to evaluate the safety and efficacy of a single dose of JNJ-78436735. While J&J is testing a single dose of its COVID-19 vaccine candidate, other companies whose vaccine candidates are in late-stage development like Pfizer (PFE - Free Report) )/BioNTech, AstraZeneca/Oxford University and Moderna are testing two shots of their respective candidates.
J&J expected to file for emergency use authorization of its vaccine candidate in early 2021. However, it is quite unclear how the study pause will impact the vaccine’s development progress and regulatory plans.
Our Take
J&J beat third-quarter estimates for earnings as well as sales. Its Pharmaceuticals unit continued to do well despite the coronavirus crisis. Meanwhile, increasing demand for its Consumer Health products and a better-than-expected procedure recovery in Medical Devices provided top-line support.
J&J raised its financial outlook for the year due to faster-than-expected recovery in sales of the Medical Devices unit as economies around the world began opening sooner than anticipated. Alex Gorsky, J&J’s chief executive officer, sounded optimistic regarding a continued recovery through the rest of the year.
However, despite the bullish results, shares were down 1.4% in pre-market trading due to the temporary halt in its coronavirus vaccine studies. So far this year, J&J’sshares have risen 4.1% compared with the industry’s 0.5% growth.
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J&J (JNJ) Beats on Q3 Earnings & Sales, Ups 2020 Guidance
Johnson & Johnson’s (JNJ - Free Report) third-quarter 2020 earnings came in at $2.20 per share, which beat the Zacks Consensus Estimate of $1.99. Earnings rose 3.8% from the year-ago period.
Adjusted earnings exclude intangible amortization, restructuring and acquisition-related expenses and some other special items. Including these items, J&J reported third-quarter earnings of $1.33 per share, up 101.5% from the year-ago quarter.
Sales of this drug and consumer products giant came in at $21.08 billion, which beat the Zacks Consensus Estimate of $20.53 billion. Sales rose 1.7% from the year-ago quarter, reflecting an operational increase of 1.7% and no impact of currency.
Organically, excluding the impact of acquisitions and divestitures, sales rose 2.0% on an operational basis in contrast to an 8.8% decrease seen in the second quarter.
Third-quarter sales in the domestic market rose 2.7% to $11.09 billion. International sales rose 0.6%, both on a reported and operational basis, to $10 billion. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 1.1% in the quarter.
Segment Details
Pharmaceutical segment sales rose 5.0% year over year to $11.42 billion, reflecting 4.6% operational growth and 0.4% positive currency impact. Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales increased 4.7%, higher than the 3.9% increase in the second quarter.
The sales increase was led by higher penetration and new indications across key products, such as Darzalex, Imbruvica and Stelara.Other core products like Invega Sustenna, J&J’s pulmonary arterial hypertension (PAH) drugs and new drug Erleada contributed significantly to sales growth.
Moreover, sales of some other key drugs like Xarelto and Invokana/Invokamet have improved after declining in the past few quarters. The sales growth was hurt by generic/biosimilar competition to drugs like Zytiga and Remicade and delayed diagnosis and slower new patient starts for some drugs amid the pandemic.
Darzalex sales rose 43.8% year over year to $1.1 billion in the quarter. Stelara sales grew 14.7% to $1.95 billion in the quarter. Imbruvica sales rose 11.9% to $1.03 billion. J&J markets Imbruvica in partnership with AbbVie (ABBV - Free Report) .
PAH revenues of $749 million rose 14.5% year over year, driven by strong sales growth for Uptravi and Opsumit. Invega Sustenna sales rose 8.8% to $926 million in the quarter. Simponi/Simponi Aria sales grew 0.9% to $592 million and Prezista sales increased 3.5% to $526 million.
Xarelto sales rose 2.9% in the quarter to $630.0 million, while sales of Invokana/Invokamet improved 24.7% to $224.0 million.
Among the new medicines, Erleada generated sales of $206 million in the quarter compared with $170 million in the previous quarter. Tremfya recorded sales of $327 million in the quarter compared with $342 million in the previous quarter.
Zytiga sales declined 20.4% to $590 million in the quarter due to generic competition. Sales of Procrit/Eprex declined 33.3% to $132 million in the quarter due to biosimilar competition. Sales of Remicade were down 18.9% in the quarter to $921 million. J&J markets Remicade in partnership with Merck (MRK - Free Report) .
Medical Devices segment sales came in at $6.15 billion, down 3.6% from the year-ago period, reflecting an operational decrease of 3.9% and a positive currency movement of 0.3%. The pandemic hit this segment the hardest due to a widespread decline in elective surgical procedures and the redeployment of hospital resources to address patients affected by COVID-19. However, the segment was much less affected in the third quarter due to market recovery compared to the second quarter. In the third quarter, J&J expected the Medical Devices unit to decline in the range of 10-25%.
Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales decreased 3.3% compared with a decline of 32.5% in the previous quarter.
The Consumer segment recorded revenues of $3.51 billion in the reported quarter, up 1.3% year over year. On an operational basis, Consumer segment sales rose 3%. Unfavorable foreign currency movement hurt sales by 1.7%.
Excluding the impact of acquisitions and divestitures, adjusted operational sales increase was 3.1% worldwide against a 3.4% decline seen in the previous quarter.
Higher sales of OTC products in the United States like Tylenol, oral care product Listerine mouthwash, OGX in skin health/beauty products and digestive health products were offset by the negative impact of the COVID-19 pandemicon international OTC products.
2020 Guidance Raised
J&J raised its earnings and sales guidance for the second time this year. Adjusted earnings per share expectations were raised from a range of $7.75-$7.95 to $7.95-$8.05. The guidance range now indicates a decline of 7.3-8.4% versus the prior expectation of a decline of 8.4-10.7%. On an operational, constant-currency basis, adjusted earnings per share are expected to decline 7.3-8.4%. The prior expectation was a decline in the range of 7.3-9.6%.
Revenues are now expected to remain flat or decline 1% to $81.2-$82.0 billion. Previous expectation for revenues was in the range of $79.9-$81.4 billion, indicating a year-over-year decline of 0.8-2.6%.
Operational constant-currency sales are expected to be flat to up 1% compared with the prior expectation of an increase of 0.5% to a decline of 1.3%. Adjusted operational sales, (excluding currency impact, acquisitions/divestitures) are expected to be up 0.5-1.5% (previous expectation was down 0.8% to up 1%).
Pause on Coronavirus Vaccine Development
On Monday, J&J paused dosing in all clinical studies on its coronavirus vaccine candidate, JNJ-78436735, including the large pivotal phase III study, ENSEMBLE, which was initiated last month. The halt resulted from an unexplained illness observed in a study participant, which is now being probed by the ENSEMBLE independent Data Safety Monitoring Board (DSMB) and also J&J’s own internal physicians.
J&J initiated ENSEMBLE to evaluate the safety and efficacy of a single dose of JNJ-78436735. While J&J is testing a single dose of its COVID-19 vaccine candidate, other companies whose vaccine candidates are in late-stage development like Pfizer (PFE - Free Report) )/BioNTech, AstraZeneca/Oxford University and Moderna are testing two shots of their respective candidates.
J&J expected to file for emergency use authorization of its vaccine candidate in early 2021. However, it is quite unclear how the study pause will impact the vaccine’s development progress and regulatory plans.
Our Take
J&J beat third-quarter estimates for earnings as well as sales. Its Pharmaceuticals unit continued to do well despite the coronavirus crisis. Meanwhile, increasing demand for its Consumer Health products and a better-than-expected procedure recovery in Medical Devices provided top-line support.
J&J raised its financial outlook for the year due to faster-than-expected recovery in sales of the Medical Devices unit as economies around the world began opening sooner than anticipated. Alex Gorsky, J&J’s chief executive officer, sounded optimistic regarding a continued recovery through the rest of the year.
However, despite the bullish results, shares were down 1.4% in pre-market trading due to the temporary halt in its coronavirus vaccine studies. So far this year, J&J’sshares have risen 4.1% compared with the industry’s 0.5% growth.
J&J currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Johnson Johnson Price, Consensus and EPS Surprise
Johnson Johnson price-consensus-eps-surprise-chart | Johnson Johnson Quote
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Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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