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Johnson & Johnson (JNJ) Down 6.9% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Johnson & Johnson (JNJ - Free Report) . Shares have lost about 6.9% 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 catalysts.
J&J’s fourth-quarter 2022 earnings came in at $2.35 per share, which beat the Zacks Consensus Estimate of $2.22 as well as our estimate of $2.21 per share. Earnings rose 10.3% 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 $1.33 per share, down 24.9% from the year-ago quarter.
Sales came in at $23.71 billion, slightly missing the Zacks Consensus Estimate of $23.72 billion. Sales declined 4.4% from the year-ago quarter, reflecting an operational increase of 0.9% and a negative currency impact of 5.3%. Excluding sales from the COVID-19 vaccine, operational sales growth was 4.6% worldwide.
Organically, excluding the impact of acquisitions and divestitures, sales rose 0.8% on an operational basis compared with an 8.2% increase in the previous quarter.
Fourth-quarter sales in the domestic market rose 2.9% to $12.52 billion. International sales declined 11.5% on a reported basis to $11.19 billion, reflecting an operational decline of 1.1%, plus a negative currency impact of 10.4%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales declined 1% in the quarter.
Overall, macroeconomic challenges and lingering COVID-related impacts hurt fourth-quarter sales growth While the Pharmaceuticals unit continued to post above-market adjusted operational sales growth, sales slowed down in the fourth quarter. COVID resurgence in China and supply constraints hurt sales in the MedTech and Consumer Health segments.
Segment Details
Pharmaceutical segment sales declined 7.4% year over year to $13.16 billion, reflecting a 2.5% operational decline and a 4.9% negative currency impact. Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales declined 2.3%. Pharmaceutical segment sales exceeded our estimates of $12.8 billion as well as the Zacks Consensus Estimate of $13.04 billion.
Sales in the domestic market declined 0.6% to $7.38 billion. International sales declined 14.9% to $5.79 billion (operational decline of 4.5%).
Higher sales of key products, such as Darzalex and Stelara as well as relatively newer drugs, Erleada and Tremfya was offset by lower sales of J&J’s single-dose COVID-19 vaccine. The sales growth was also dampened by lower sales of key medicine, Imbruvica and generic/biosimilar competition to drugs like Zytiga and Remicade.
Darzalex sales rose 26.6% year over year to $2.08 billion in the quarter, which missed our estimates of $2.11 billion.
Stelara sales grew 2.3% to $2.39 billion in the quarter. driven by strong market growth and share gains in Crohn's disease and ulcerative colitis as well as favorable prior period adjustment. Sales growth was partially offset by unfavorable patient mix and rebating in the United States as well as austerity measures in Europe and unfavorable shipment timing in Asia Pacific. Stelara sales missed our estimate of $2.45 billion. While J&J expects Stelara volumes to increase till the loss of exclusivity in late 2023, the growth is expected to be hurt by pricing pressure as well as potential increased austerity measures across Europe.
Imbruvica sales declined 18.5% to $866 million due to increased competitive pressure in the United States from novel oral agents and below pre-COVID levels in the CLL market in the United States. Imbruvica sales beat our estimates of $849.7 million.
Among the newer medicines, Erleada generated sales of $541 million in the quarter, up 40.9% year over year. Tremfya recorded sales of $752 million in the quarter, up 8.5% year over year driven by share gains in psoriasis and psoriatic arthritis indications, partially offset by a net unfavorable prior period adjustment.
PAH revenues of $870 million rose 2.3% year over year. Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales declined 2% to $1.0 billion in the quarter. Simponi/Simponi Aria sales declined 10.2% to $501 million, while Prezista sales decreased 4.3% to $493 million.
Xarelto sales rose 3.4% in the quarter to $667 million, while sales of Invokana/Invokamet declined 24.1% to $91.0 million.
Zytiga sales declined 50.8% to $270 million in the quarter, predominantly due to loss of exclusivity in Europe in September. Sales of Remicade were down 37.8% in the quarter to $475 million.
J&J’s single-dose COVID-19 vaccine generated sales of $689 million in the fourth quarter, down 57.4% year over year. International sales accounted for all COVID-19 vaccine sales.
Excluding COVID-19 vaccine, sales in the Pharmaceutical segment declined 1% as an operational increase of 3.9% was offset by a negative currency movement of 4.9%. In the first half of the year, the loss of exclusivity of products like Zytiga and Invega Sustenna in Europe as well as continued pricing pressure is expected to put pressure on the top line. The ramp up of new products is expected to be stronger in the second half of the year.
J&J continues to expect its Pharmaceutical business to deliver market-leading adjusted operational sales growth in 2023 despite the Stelara loss of exclusivity in the second half in the United States.
The MedTech segment sales came in at $6.78 billion, down 1.2% from the year-ago period, as an operational increase of 4.9% was offset by a negative currency movement of 6.1%. The MedTech segment sales missed our estimate of $7.06 billion as well as the Zacks Consensus Estimate of $6.97 billion.
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 4.4%.
Sales in the MedTech segment were driven by a recovery in surgical procedures, better commercial execution and new product launches. However, sales were partly hurt by volume-based procurement (VBP) issues and COVID resurgence in China and as well as supply constraints.
Interventional Solutions grew 7.8% driven by new products and continued growth of electrophysiology products. In Surgery, Advanced Surgery declined 7.0% worldwide. General Surgery declined 3.5% worldwide. Worldwide orthopedics declined 0.4%. Worldwide Vision declined 2.2%.
Domestic market sales rose 7.1% year over year to $3.45 billion. International market sales declined 8.6% year over year to $3.33 billion, which included an operational increase of 2.9% and a negative currency impact of 11.5%.
In the MedTech segment, J&J expects continued recovery in worldwide procedure volumes and uptake from recently launched products to drive sales in 2023. However, the lingering headwinds from hospital staffing will be the most significant limitation on the pace of recovery. In China, J&J expects continued pressure in 2023 due to lingering effects of the pandemic and the impact of the VBP program.
In the MedTech segment, second-half operational sales growth is expected to be higher than the first half of the year as the ongoing procedure recovery is expected to improve as the year progresses. Some of the COVID seen in China in the fourth quarter of 2022 is expected to carry over into early 2023. The uptake of new product launches is expected to be more pronounced in the second half.
The Consumer Health segment recorded revenues of $3.77 billion in the reported quarter, up 1% year over year, reflecting a 6.4% operational increase and a 5.4% negative currency impact. Consumer Health segment sales came ahead of our estimate of $3.70 and the Zacks Consensus Estimate of $3.73 billion.
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 6.4%.
The sales growth was driven by strategic price increases, growth in OTC due to a strong cold, cough and flu season and higher sales in Neutrogena due to market growth and new product launches in Asia Pacific and Latin America. This growth was partially offset by supply constraints in the United States (due to raw material availability and labor shortages), COVID-19 impacts in China and sales suspension of personal care products in Russia.
Sales in the domestic market rose 10.9% from the year-ago period to $1.7 billion. The international segment declined 5.8% to $2.07 billion, which included an operational increase of 3.2% and a negative currency impact of 9.0%.
In the Consumer segment, J&J expects continued growth in markets and strategic price increases to benefit results in 2023 although some challenges like inflationary pressure within the supply chain and higher input costs are expected to continue. Second-half sales are expected to be stronger than the first half.
2022 Results
Full-year 2022 sales rose 1.3% to $94.94 billion, missing the Zacks Consensus Estimate of $94.99 billion. Sales beat the guided range of $93.0 billion to $93.5 billion.
Adjusted earnings for 2022 were $10.15 per share, up 3.6% year over year. Earnings beat the Zacks Consensus Estimate of $10.04 per share as well as the guided range of $10.02-$10.07 per share.
Issues 2023 Guidance
The company’s profit outlook for 2023 was above analyst expectations while the sales outlook was below estimates.
J&J expects to generate revenues in the range of $96.9 billion to $97.9 billion. This guidance excludes any revenues from J&J’s COVID-19 vaccine. The guidance range fell short of the Zacks Consensus Estimate of $98.18 billion. Revenue growth is expected in the range of 4.5% – 5.5%.
Excluding the COVID-19 vaccine, operational constant-currency sales are expected to increase in the range of 4.5%-5.5%. The adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth guidance is 3.5%-4.5%.
Adjusted earnings per share are expected in the range of $10.45 – $10.65. The Zacks Consensus Estimate is pegged at $10.22 per share.
The earnings range indicates an increase of 3. On an operational, constant-currency basis, adjusted earnings per share are expected to increase 2.5%-4.5%.
J&J does not expect any impact from currency headwinds on reported sales for the year as a potential negative impact in the first half of the year is likely to be offset by a likely favorable impact in the second half.
Adjusted pretax operating margins are expected to be flat from 2022 levels as the impact of continued operating expense leverage will be offset by the impact of inflationary pressure. J&J expects supply constraints, inflationary pressure and rising input costs to continue to hurt margins in 2023. Operating margin is expected to be better in the second half than the first.
Other income is expected to be in the range of $1.9 billion to $2.1 billion. Adjusted tax rate guidance was maintained in the range of 15.5 % to 16.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Johnson & Johnson has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Johnson & Johnson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Johnson & Johnson (JNJ) Down 6.9% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Johnson & Johnson (JNJ - Free Report) . Shares have lost about 6.9% 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 catalysts.
Q4 Earnings Beat, Sales Miss, 2023 EPS View Upbeat
J&J’s fourth-quarter 2022 earnings came in at $2.35 per share, which beat the Zacks Consensus Estimate of $2.22 as well as our estimate of $2.21 per share. Earnings rose 10.3% 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 $1.33 per share, down 24.9% from the year-ago quarter.
Sales came in at $23.71 billion, slightly missing the Zacks Consensus Estimate of $23.72 billion. Sales declined 4.4% from the year-ago quarter, reflecting an operational increase of 0.9% and a negative currency impact of 5.3%. Excluding sales from the COVID-19 vaccine, operational sales growth was 4.6% worldwide.
Organically, excluding the impact of acquisitions and divestitures, sales rose 0.8% on an operational basis compared with an 8.2% increase in the previous quarter.
Fourth-quarter sales in the domestic market rose 2.9% to $12.52 billion. International sales declined 11.5% on a reported basis to $11.19 billion, reflecting an operational decline of 1.1%, plus a negative currency impact of 10.4%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales declined 1% in the quarter.
Overall, macroeconomic challenges and lingering COVID-related impacts hurt fourth-quarter sales growth While the Pharmaceuticals unit continued to post above-market adjusted operational sales growth, sales slowed down in the fourth quarter. COVID resurgence in China and supply constraints hurt sales in the MedTech and Consumer Health segments.
Segment Details
Pharmaceutical segment sales declined 7.4% year over year to $13.16 billion, reflecting a 2.5% operational decline and a 4.9% negative currency impact. Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales declined 2.3%. Pharmaceutical segment sales exceeded our estimates of $12.8 billion as well as the Zacks Consensus Estimate of $13.04 billion.
Sales in the domestic market declined 0.6% to $7.38 billion. International sales declined 14.9% to $5.79 billion (operational decline of 4.5%).
Higher sales of key products, such as Darzalex and Stelara as well as relatively newer drugs, Erleada and Tremfya was offset by lower sales of J&J’s single-dose COVID-19 vaccine. The sales growth was also dampened by lower sales of key medicine, Imbruvica and generic/biosimilar competition to drugs like Zytiga and Remicade.
Darzalex sales rose 26.6% year over year to $2.08 billion in the quarter, which missed our estimates of $2.11 billion.
Stelara sales grew 2.3% to $2.39 billion in the quarter. driven by strong market growth and share gains in Crohn's disease and ulcerative colitis as well as favorable prior period adjustment. Sales growth was partially offset by unfavorable patient mix and rebating in the United States as well as austerity measures in Europe and unfavorable shipment timing in Asia Pacific. Stelara sales missed our estimate of $2.45 billion. While J&J expects Stelara volumes to increase till the loss of exclusivity in late 2023, the growth is expected to be hurt by pricing pressure as well as potential increased austerity measures across Europe.
Imbruvica sales declined 18.5% to $866 million due to increased competitive pressure in the United States from novel oral agents and below pre-COVID levels in the CLL market in the United States. Imbruvica sales beat our estimates of $849.7 million.
Among the newer medicines, Erleada generated sales of $541 million in the quarter, up 40.9% year over year. Tremfya recorded sales of $752 million in the quarter, up 8.5% year over year driven by share gains in psoriasis and psoriatic arthritis indications, partially offset by a net unfavorable prior period adjustment.
PAH revenues of $870 million rose 2.3% year over year. Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales declined 2% to $1.0 billion in the quarter. Simponi/Simponi Aria sales declined 10.2% to $501 million, while Prezista sales decreased 4.3% to $493 million.
Xarelto sales rose 3.4% in the quarter to $667 million, while sales of Invokana/Invokamet declined 24.1% to $91.0 million.
Zytiga sales declined 50.8% to $270 million in the quarter, predominantly due to loss of exclusivity in Europe in September. Sales of Remicade were down 37.8% in the quarter to $475 million.
J&J’s single-dose COVID-19 vaccine generated sales of $689 million in the fourth quarter, down 57.4% year over year. International sales accounted for all COVID-19 vaccine sales.
Excluding COVID-19 vaccine, sales in the Pharmaceutical segment declined 1% as an operational increase of 3.9% was offset by a negative currency movement of 4.9%. In the first half of the year, the loss of exclusivity of products like Zytiga and Invega Sustenna in Europe as well as continued pricing pressure is expected to put pressure on the top line. The ramp up of new products is expected to be stronger in the second half of the year.
J&J continues to expect its Pharmaceutical business to deliver market-leading adjusted operational sales growth in 2023 despite the Stelara loss of exclusivity in the second half in the United States.
The MedTech segment sales came in at $6.78 billion, down 1.2% from the year-ago period, as an operational increase of 4.9% was offset by a negative currency movement of 6.1%. The MedTech segment sales missed our estimate of $7.06 billion as well as the Zacks Consensus Estimate of $6.97 billion.
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 4.4%.
Sales in the MedTech segment were driven by a recovery in surgical procedures, better commercial execution and new product launches. However, sales were partly hurt by volume-based procurement (VBP) issues and COVID resurgence in China and as well as supply constraints.
Interventional Solutions grew 7.8% driven by new products and continued growth of electrophysiology products. In Surgery, Advanced Surgery declined 7.0% worldwide. General Surgery declined 3.5% worldwide. Worldwide orthopedics declined 0.4%. Worldwide Vision declined 2.2%.
Domestic market sales rose 7.1% year over year to $3.45 billion. International market sales declined 8.6% year over year to $3.33 billion, which included an operational increase of 2.9% and a negative currency impact of 11.5%.
In the MedTech segment, J&J expects continued recovery in worldwide procedure volumes and uptake from recently launched products to drive sales in 2023. However, the lingering headwinds from hospital staffing will be the most significant limitation on the pace of recovery. In China, J&J expects continued pressure in 2023 due to lingering effects of the pandemic and the impact of the VBP program.
In the MedTech segment, second-half operational sales growth is expected to be higher than the first half of the year as the ongoing procedure recovery is expected to improve as the year progresses. Some of the COVID seen in China in the fourth quarter of 2022 is expected to carry over into early 2023. The uptake of new product launches is expected to be more pronounced in the second half.
The Consumer Health segment recorded revenues of $3.77 billion in the reported quarter, up 1% year over year, reflecting a 6.4% operational increase and a 5.4% negative currency impact. Consumer Health segment sales came ahead of our estimate of $3.70 and the Zacks Consensus Estimate of $3.73 billion.
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 6.4%.
The sales growth was driven by strategic price increases, growth in OTC due to a strong cold, cough and flu season and higher sales in Neutrogena due to market growth and new product launches in Asia Pacific and Latin America. This growth was partially offset by supply constraints in the United States (due to raw material availability and labor shortages), COVID-19 impacts in China and sales suspension of personal care products in Russia.
Sales in the domestic market rose 10.9% from the year-ago period to $1.7 billion. The international segment declined 5.8% to $2.07 billion, which included an operational increase of 3.2% and a negative currency impact of 9.0%.
In the Consumer segment, J&J expects continued growth in markets and strategic price increases to benefit results in 2023 although some challenges like inflationary pressure within the supply chain and higher input costs are expected to continue. Second-half sales are expected to be stronger than the first half.
2022 Results
Full-year 2022 sales rose 1.3% to $94.94 billion, missing the Zacks Consensus Estimate of $94.99 billion. Sales beat the guided range of $93.0 billion to $93.5 billion.
Adjusted earnings for 2022 were $10.15 per share, up 3.6% year over year. Earnings beat the Zacks Consensus Estimate of $10.04 per share as well as the guided range of $10.02-$10.07 per share.
Issues 2023 Guidance
The company’s profit outlook for 2023 was above analyst expectations while the sales outlook was below estimates.
J&J expects to generate revenues in the range of $96.9 billion to $97.9 billion. This guidance excludes any revenues from J&J’s COVID-19 vaccine. The guidance range fell short of the Zacks Consensus Estimate of $98.18 billion. Revenue growth is expected in the range of 4.5% – 5.5%.
Excluding the COVID-19 vaccine, operational constant-currency sales are expected to increase in the range of 4.5%-5.5%. The adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth guidance is 3.5%-4.5%.
Adjusted earnings per share are expected in the range of $10.45 – $10.65. The Zacks Consensus Estimate is pegged at $10.22 per share.
The earnings range indicates an increase of 3. On an operational, constant-currency basis, adjusted earnings per share are expected to increase 2.5%-4.5%.
J&J does not expect any impact from currency headwinds on reported sales for the year as a potential negative impact in the first half of the year is likely to be offset by a likely favorable impact in the second half.
Adjusted pretax operating margins are expected to be flat from 2022 levels as the impact of continued operating expense leverage will be offset by the impact of inflationary pressure. J&J expects supply constraints, inflationary pressure and rising input costs to continue to hurt margins in 2023. Operating margin is expected to be better in the second half than the first.
Other income is expected to be in the range of $1.9 billion to $2.1 billion. Adjusted tax rate guidance was maintained in the range of 15.5 % to 16.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Johnson & Johnson has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Johnson & Johnson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.