It has been about a month since the last earnings report for Johnson & Johnson (JNJ Quick QuoteJNJ - Free Report) . Shares have lost about 4.3% 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 the most recent earnings report in order to get a better handle on the important drivers.

Q4 Earnings Beat Estimates by a Penny, Sales Miss

J&J’s fourth-quarter 2021 earnings came in at $2.13 per share, which beat the Zacks Consensus Estimate of $2.12 by a penny. Earnings increased 14.5% from the year-ago period.

Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported fourth-quarter earnings of $1.77 per share, up 172.3% from the year-ago quarter.

Sales came in at $24.8 billion, which slightly missed the Zacks Consensus Estimate of $25.3 billion. Sales rose 10.4% from the year-ago quarter, reflecting an operational increase of 11.6% and a negative currency impact of 1.2%.

Organically, excluding the impact of acquisitions and divestitures, sales rose 12.3% on an operational basis compared with a 10.6% increase seen in the previous quarter. Its Pharmaceuticals unit sales growth remained above-market levels though sales of some drugs were soft in the quarter. The Medical Devices segment was hurt by softening of recovery trends in medical and surgical procedures due to Omicron-related infection rate increase and hospital staffing issues. Sales of the Consumer segment continued to improve while navigating industry-wide supply constraints. Additional shipping days in the fourth quarter of 2020 hurt fourth-quarter 2021 sales growth by approximately 400 basis points.

Fourth-quarter sales in the domestic market rose 3% to $12.16 billion. International sales rose 18.5% on a reported basis to $12.64 billion, reflecting an operational increase of 21.2% and a negative currency impact of 2.7%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 22.4% in the quarter.

Segment Details

Pharmaceutical segment sales rose 16.5% year over year to $14.29 billion, reflecting 17.9% operational growth and 1.4% negative currency impact. Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales rose 18.6%.

Sales in the domestic market rose 4.2% to $7.4 billion. International sales rose 33.4% to $6.87 billion (operational increase of 36.9%).

The sales increase was led by higher penetration and new indications across key products, such as Darzalex and Stelara. Other core products like Invega Sustenna and new drugs, Erleada and Tremfya contributed significantly to sales growth. J&J’s single-dose COVID-19 vaccine also contributed to sales growth. However, the sales growth was dampened by lower sales of key medicine, Imbruvica and generic/biosimilar competition to drugs like Zytiga and Remicade.

Imbruvica sales declined 5% to $1.06 billion due to competitive pressure in the United States due to new oral competition. The decline in United States was partially offset by growth in ex-U.S. markets.

Darzalex sales rose 31.4% year over year to $1.65 billion in the quarter driven by share gains across all lines of therapy. The company also witnessed increased adoption of the subcutaneous formulation in Europe and United States while global launches continued.

Stelara sales grew 4% to $2.33 billion in the quarter driven by strong share gains in Crohn's disease and ulcerative colitis. However, negative prior period rebate adjustment and reserve adjustment partially offset the sales growth.

PAH revenues of $851 million declined 1.6% year over year due to COVID-19 market constraints and generic entrants.

Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales rose 6.5% to $1.03 billion in the quarter. Simponi/Simponi Aria sales declined 3.2% to $559 million while Prezista sales decreased 9.3% to $515 million.  

Xarelto sales rose 2.5% in the quarter to $644 million while sales of Invokana/Invokamet declined 45.1% to $120 million.

Among the newer medicines, Erleada generated sales of $384 million in the quarter, up 59.8% year over year, driven by strong share uptake, increased market penetration in the United States and new launches outside the United States. Tremfya recorded sales of $693 million in the quarter, up 81.5% year over year due to share gains in the psoriasis market and continued penetration into the psoriatic arthritis indication for which approval was received in 2020.

Zytiga sales declined 11.8% to $548 million in the quarter due to generic competition. Sales of Procrit/Eprex declined 12.9% to $113 million in the quarter due to biosimilar competition. Sales of Remicade were down 15.2% in the quarter to $764 million. While U.S. sales declined 22.2%, sales in international markets declined 2.3%. U.S. exports rose 53.5%.

J&J’s single-dose COVID-19 vaccine generated sales of $1.62 in the fourth quarter compared with $502 million in the third quarter.

J&J continues to expect its Pharmaceutical business to deliver market-leading sales growth in 2022 driven by drugs like Darzalex, Tremfya, Stelara, Erleada and newly launched Rybrevant.

Medical Devices segment sales came in at $6.86 billion, up 4.1% from the year-ago period, reflecting an operational increase of 5.3% and a negative currency movement of 1.2%.

Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales rose 5.6%. The segment continued to be impacted by COVID-19. The Omicron variant softened recovery trends in medical and surgical procedures, especially toward the end of the fourth quarter. The procedure volume trend declines were more acute in areas like spine and knees as they are more elective in nature.

Interventional Solutions grew 15.3% driven by market recovery, successful penetration of new products and better commercial execution. Advanced Surgery grew 7.6% worldwide, driven by market recovery. General Surgery grew 1.7% worldwide led by wound closure and innovation penetration. Worldwide orthopedics declined 0.7% due to COVID impacts. Worldwide Vision grew 11%.

Domestic market sales rose 1% year over year to $3.22 billion. International market sales rose 7% year over year to $3.64 billion. On an operational basis, international rose 9.3%.

In the Medical Devices segment, J&J expects COVID-19 headwinds and hospital staffing shortages to continue to hurt procedure volume trends in 2022, mainly in the first half. However, the company expects market recovery to improve as the year progresses as global health systems treat new patients and work through procedure backlogs. The market recovery coupled with contribution from new product launches is expected to lead to better performance in the second half of 2022.

The Consumer segment recorded revenues of $3.66 billion in the reported quarter, up 1.1% year over year, reflecting a 1.8% operational increase and 0.7% negative currency impact.

Excluding the impact of acquisitions and divestitures, adjusted operational sales rose 2.9% worldwide helped by above-market growth in the OTC segment.

However, external supply constraints (due to raw material availability and labor shortages) hurt sales of the skin health and beauty franchise. Oral Care sales declined due to the impact of divestitures and category declined in EMEA. Baby Care franchise also declined in the quarter due to prior-year retailer stocking and external supply constraints in the United States, partially offset by e-commerce growth of Aveeno Baby and Asia Pacific. Wound Care declined as strong performance of Band-Aid brand and adhesive bandages in the United States was offset by impact of divestures. Women's Health grew driven by market recovery in Latin America.

Sales in the domestic market rose 1.3% from the year-ago period to $1.53 billion. The international segment rose 0.9% to $2.13 billion, which included an operational increase of 2.1% and a negative currency impact of 1.2%.

In the Consumer segment, J&J expects the supply constraints to continue in 2022 with the majority of the impact expected in the first half primarily in skin health and beauty segments.

J&J is instituting price increases across its Consumer Health portfolio in 2022 due to the impact of inflationary pressure, including higher input costs. J&J expects that the price increases will enable it to remain competitive in 2022.

On the fourth-quarter conference call, management said that it will announce key executive leadership appointments for the new Consumer Health company in the first half of 2022 and will announce the new company name and headquarters location around mid-2022.

2021 Results

Full-year 2021 sales rose 13.6% to $93.8 billion, missing the Zacks Consensus Estimate of $94.2 billion. Sales were slightly below the guided range of $94.1 billion - $94.6 billion.

Adjusted earnings for 2021 were $9.80 per share, which were in line with the Zacks Consensus Estimate of $9.80 and up 22% year over year. Earnings were within the guided range of $9.77-$9.82.

2022 Outlook

J&J issued an encouraging financial guidance for 2022 despite COVID impacts and hospital staff shortages in Medical Devices unit and supply constraints and inflationary pressure in the Consumer segment.

Sales are expected to be in the range of $98.9 billion-$100.4 billion. The sales range indicates a year-over-year increase of 5.5. The guidance includes $3.0 billion-$3.5 billion in revenues from the COVID-19 vaccine. Excluding revenues from the COVID-19 vaccine, the base business is expected to generate revenues in the range of $95.9 billion to $96.9 billion. Operational constant-currency sales are expected to increase in the range of 7%-8.5% (including the COVID vaccine). Excluding the COVID-19 vaccine, operational constant-currency sales are expected to increase in the range of 6.5%-7.5%. The adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth guidance is the same as operational constant-currency sales discussed above.

Adjusted earnings per share are expected in the range of $10.40-$10.60. The earnings range indicates an increase of 6.1%-8.2%. On an operational, constant-currency basis, adjusted earnings per share are expected to increase 8.2%-10.2%.  The COVID-19 vaccine is expected to contribute approximately an incremental 20 cents to earnings per share in 2022. Adjusted operating margins are expected to improve by approximately 50 basis points year over year in 2022.

On the conference call, new CEO Joaquin Duato took a more aggressive stance for M&A activity saying it strong cash position will help it pursue tuck-in M&A to grow its business.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Johnson & Johnson has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Johnson & Johnson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.