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Johnson & Johnson (JNJ) Up 5.5% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Johnson & Johnson (JNJ - Free Report) . Shares have added about 5.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Johnson & Johnson due for a pullback? 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.
Q1 Earnings Beat Estimates, Sales Miss
J&J’s first-quarter 2024 earnings came in at $2.71 per share, which beat the Zacks Consensus Estimate of $2.64. Earnings rose 12.4% from the year-ago period.
Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported first-quarter earnings of $2.20 per share against a loss of 19 cents in the year-ago quarter.
Sales came in at $21.38 billion, missing the Zacks Consensus Estimate of $21.40 billion by a slight margin. Sales rose 2.3% from the year-ago quarter, reflecting an operational increase of 3.9% and a negative currency impact of 1.6%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 4% on an operational basis. Excluding sales of COVID-19 vaccine, organic sales rose 7.7%.
First-quarter sales in the domestic market rose 7.8% to $11.62 billion. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, domestic sales rose 7.9% in the quarter.
International sales declined 3.4% on a reported basis to $9.76 billion, reflecting an operational decrease of 0.3% and a negative currency impact of 3.1%. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, international sales declined 0.3% in the quarter.
Segment Details
Sales in J&J’s Innovative Medicines segment (previously the Pharmaceutical segment) rose 1.1% year over year to $13.56 billion, reflecting a 2.5% operational increase and a 1.4% negative currency impact. Innovative Medicines sales beat the Zacks Consensus Estimate of $13.46 billion as well as our model estimate of $13.24 billion. Excluding the impact of all acquisitions and divestitures and currency on an adjusted operational basis, worldwide sales rose 2.5%. Excluding sales from J&J’s COVID-19 vaccine, operational sales grew 8.3%.
Higher sales of key products such as Darzalex, Stelara, Tremfya, Uptravi and Erleada drove the segment’s growth. New drugs like Carvykti, Tecvayli and Spravato also contributed to growth. The sales growth was partially dampened by lower sales of Imbruvica, COVID-19 vaccine and generic/biosimilar competition to drugs like Zytiga and Remicade.
In the Innovative Medicines segment, sales in the United States rose 8.4%, while outside U.S. sales declined 4% on an operational basis.
Darzalex sales rose 18.9% year over year to $2.69 billion in the quarter, driven by continued share gains across all lines of therapy, particularly the front-line setting. Sales slightly beat the Zacks Consensus Estimate of $2.66 billion and our model estimate of $2.63 billion.
Stelara sales grew 0.3% to $2.45 billion in the quarter, driven by market growth and share gains for the IBD indications. However, unfavorable patient mix in the United States and share loss for psoriasis and psoriatic arthritis indications hurt the drug’s sales. Stelara sales missed the Zacks Consensus Estimate of $2.59 billion and our model estimate of $2.49 billion. With expected biosimilar entry in 2025, continued volume growth is expected to be largely offset by price declines.
Imbruvica sales declined 5.2% to $784.0 million due to rising competitive pressure in the United States due to new oral competition. Imbruvica sales were, however, better than the Zacks Consensus Estimate of $712.0 million and our estimate of $699.8 million.
Erleada generated sales of $689 million in the quarter, up 27% year over year, driven by share gains. Erleada sales beat the Zacks Consensus Estimate of $662 million as well as our model estimate of $661.5 million.
Tremfya recorded sales of $808 million in the quarter, up 26.3% year over year, driven by strong market growth and share gains. Tremfya sales beat the Zacks Consensus Estimate of $795.0 million as well as our model estimate of $761.6 million.
New drug Carvykti, a BCMA CAR-T therapy approved in 2022 for relapsed or refractory multiple myeloma (R/R MM), recorded sales of $157 million compared with $159 million in the previous quarter. Another new drug, Tecvayli, also approved in 2022 for R/R MM, recorded sales of $133 million in the quarter.
Spravato recorded sales of $225.0 million, up 72.2% year over year, driven by share gains and additional market launches.
PAH drug Uptravi recorded sales of $468.0 million, up 29.2% year over year, driven by favorable patient mix, share gains and market growth. Xarelto sales declined 10.4% in the quarter to $518 million due to an unfavorable patient mix.
Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales rose 1.2% to $1.06 billion in the quarter. Simponi/Simponi Aria sales rose 3% to $554.0 million, while Prezista sales declined 12.3% to $418.0 million.
Zytiga sales declined 25.9% to $181.0 million in the quarter due to generic competition. Sales of Remicade were down 10.9% in the quarter to $434 million.
J&J’s single-dose COVID-19 vaccine generated sales of $25 million in the quarter, down 96.6% year over year. International sales accounted for all COVID-19 vaccine sales.
In 2024, J&J expects to record above-market growth in the Innovative Medicine unit, for the 13th consecutive quarter. The growth is expected to be driven by market share gains for key products like Darzalex, Tremfya and Erleada and rapid adoption of new products such as Carvykti, Tecvayli, Talvey and Spravato. Innovative Medicine sales growth is expected to be slightly stronger in the first half of the year compared to the second half due to the potential entry of Stelara biosimilars in Europe in mid-2024.
MedTech segment sales came in at $7.82 billion, up 4.5% from the year-ago period, as an operational increase of 6.3% was offset by a negative currency movement of 1.8%. MedTech segment sales missed the Zacks Consensus Estimate as well as our model estimate of $7.93 billion.
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 6.5%.
In the MedTech segment, sales rose 6.6% in the United States and 6.1% outside of the United States on an operational basis.
Sales in the MedTech business were hurt by fewer selling days, disproportionately impacting orthopedics, in the first quarter. Strong global procedure growth, new product uptake and commercial execution continued to benefit the business unit.
Cardiovascular (previously Interventional Solutions) sales grew 20.2%, driven by growth of electrophysiology products in all regions and higher sales of Abiomed. Worldwide Surgery declined 0.7% as competitive pressure and VBP issues in China partially offset procedure recovery and strength of biosurgery and wound closure portfolios. Worldwide orthopedics rose 4.3%, benefiting from a one-time revenue recognition timing change, which partially offset the impact of reduced selling days in the quarter. Strong performance in hips and knees was driven by strong procedure recovery and growth in new products. Trauma and spine were negatively impacted by competitive pressures. Worldwide Vision declined 3.3% due to lower sales of contact lenses, China VBP issues and the Blink divestiture.
In 2024, in the MedTech segment, J&J expects operational sales growth to be relatively consistent throughout the year. Procedure volumes are expected to be above pre-COVID levels with a modest impact from Russia sanctions in the first half and China VBP pricing impact in some categories.
2024 Outlook
J&J tightened its total revenue expectations from a range of $87.8 billion-$88.6 billion to $88.0 billion-$88.4 billion. The new sales range indicates growth in the range of 4.7%-5.2% compared with 4.5%- 5.5% expected previously.
Operational sales growth is expected in the range of 5.5, compared with 5 expected previously.
Adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth is also expected to be in the range of 5.5 compared with 5 expected previously.
The revenue figures exclude revenues from COVID-19 vaccine sales.
Foreign exchange is expected to hurt 2024 sales growth by approximately 0.8% versus the prior expectation of 0.5%.
Adjusted earnings per share are expected in the range of $10.57-$10.72 compared with $10.55-$10.75 expected previously. The earnings range implies growth in the range of 6.6%-8.1% (6.4%-8.4% expected previously).
On an operational, constant-currency basis, adjusted earnings per share are expected to increase in the range of 6.9%-8.4% (previously 6.4%-8.4%).
Adjusted pretax operating margin is expected to improve approximately 50 basis points from 2023.
Other income is expected to be in the range of $1.2 billion to $1.4 billion. Net interest income is expected in the range of $550 million to $650 million compared with $450 million to $550 million expected previously.
The adjusted tax rate is expected in the range of 16.0% to 17.5%.
The 2024 financial guidance excludes any impact from the pending acquisition of Shockwave. The transaction is expected to close in mid-2024. J&J is likely to update its guidance to reflect the expected dilution to adjusted earnings per share in 2024 of approximately 10 cents per share due to financing costs.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Johnson & Johnson has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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) Up 5.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Johnson & Johnson (JNJ - Free Report) . Shares have added about 5.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Johnson & Johnson due for a pullback? 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.
Q1 Earnings Beat Estimates, Sales Miss
J&J’s first-quarter 2024 earnings came in at $2.71 per share, which beat the Zacks Consensus Estimate of $2.64. Earnings rose 12.4% from the year-ago period.
Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported first-quarter earnings of $2.20 per share against a loss of 19 cents in the year-ago quarter.
Sales came in at $21.38 billion, missing the Zacks Consensus Estimate of $21.40 billion by a slight margin. Sales rose 2.3% from the year-ago quarter, reflecting an operational increase of 3.9% and a negative currency impact of 1.6%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 4% on an operational basis. Excluding sales of COVID-19 vaccine, organic sales rose 7.7%.
First-quarter sales in the domestic market rose 7.8% to $11.62 billion. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, domestic sales rose 7.9% in the quarter.
International sales declined 3.4% on a reported basis to $9.76 billion, reflecting an operational decrease of 0.3% and a negative currency impact of 3.1%. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, international sales declined 0.3% in the quarter.
Segment Details
Sales in J&J’s Innovative Medicines segment (previously the Pharmaceutical segment) rose 1.1% year over year to $13.56 billion, reflecting a 2.5% operational increase and a 1.4% negative currency impact. Innovative Medicines sales beat the Zacks Consensus Estimate of $13.46 billion as well as our model estimate of $13.24 billion. Excluding the impact of all acquisitions and divestitures and currency on an adjusted operational basis, worldwide sales rose 2.5%. Excluding sales from J&J’s COVID-19 vaccine, operational sales grew 8.3%.
Higher sales of key products such as Darzalex, Stelara, Tremfya, Uptravi and Erleada drove the segment’s growth. New drugs like Carvykti, Tecvayli and Spravato also contributed to growth. The sales growth was partially dampened by lower sales of Imbruvica, COVID-19 vaccine and generic/biosimilar competition to drugs like Zytiga and Remicade.
In the Innovative Medicines segment, sales in the United States rose 8.4%, while outside U.S. sales declined 4% on an operational basis.
Darzalex sales rose 18.9% year over year to $2.69 billion in the quarter, driven by continued share gains across all lines of therapy, particularly the front-line setting. Sales slightly beat the Zacks Consensus Estimate of $2.66 billion and our model estimate of $2.63 billion.
Stelara sales grew 0.3% to $2.45 billion in the quarter, driven by market growth and share gains for the IBD indications. However, unfavorable patient mix in the United States and share loss for psoriasis and psoriatic arthritis indications hurt the drug’s sales. Stelara sales missed the Zacks Consensus Estimate of $2.59 billion and our model estimate of $2.49 billion. With expected biosimilar entry in 2025, continued volume growth is expected to be largely offset by price declines.
Imbruvica sales declined 5.2% to $784.0 million due to rising competitive pressure in the United States due to new oral competition. Imbruvica sales were, however, better than the Zacks Consensus Estimate of $712.0 million and our estimate of $699.8 million.
Erleada generated sales of $689 million in the quarter, up 27% year over year, driven by share gains. Erleada sales beat the Zacks Consensus Estimate of $662 million as well as our model estimate of $661.5 million.
Tremfya recorded sales of $808 million in the quarter, up 26.3% year over year, driven by strong market growth and share gains. Tremfya sales beat the Zacks Consensus Estimate of $795.0 million as well as our model estimate of $761.6 million.
New drug Carvykti, a BCMA CAR-T therapy approved in 2022 for relapsed or refractory multiple myeloma (R/R MM), recorded sales of $157 million compared with $159 million in the previous quarter. Another new drug, Tecvayli, also approved in 2022 for R/R MM, recorded sales of $133 million in the quarter.
Spravato recorded sales of $225.0 million, up 72.2% year over year, driven by share gains and additional market launches.
PAH drug Uptravi recorded sales of $468.0 million, up 29.2% year over year, driven by favorable patient mix, share gains and market growth. Xarelto sales declined 10.4% in the quarter to $518 million due to an unfavorable patient mix.
Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales rose 1.2% to $1.06 billion in the quarter. Simponi/Simponi Aria sales rose 3% to $554.0 million, while Prezista sales declined 12.3% to $418.0 million.
Zytiga sales declined 25.9% to $181.0 million in the quarter due to generic competition. Sales of Remicade were down 10.9% in the quarter to $434 million.
J&J’s single-dose COVID-19 vaccine generated sales of $25 million in the quarter, down 96.6% year over year. International sales accounted for all COVID-19 vaccine sales.
In 2024, J&J expects to record above-market growth in the Innovative Medicine unit, for the 13th consecutive quarter. The growth is expected to be driven by market share gains for key products like Darzalex, Tremfya and Erleada and rapid adoption of new products such as Carvykti, Tecvayli, Talvey and Spravato. Innovative Medicine sales growth is expected to be slightly stronger in the first half of the year compared to the second half due to the potential entry of Stelara biosimilars in Europe in mid-2024.
MedTech segment sales came in at $7.82 billion, up 4.5% from the year-ago period, as an operational increase of 6.3% was offset by a negative currency movement of 1.8%. MedTech segment sales missed the Zacks Consensus Estimate as well as our model estimate of $7.93 billion.
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 6.5%.
In the MedTech segment, sales rose 6.6% in the United States and 6.1% outside of the United States on an operational basis.
Sales in the MedTech business were hurt by fewer selling days, disproportionately impacting orthopedics, in the first quarter. Strong global procedure growth, new product uptake and commercial execution continued to benefit the business unit.
Cardiovascular (previously Interventional Solutions) sales grew 20.2%, driven by growth of electrophysiology products in all regions and higher sales of Abiomed. Worldwide Surgery declined 0.7% as competitive pressure and VBP issues in China partially offset procedure recovery and strength of biosurgery and wound closure portfolios. Worldwide orthopedics rose 4.3%, benefiting from a one-time revenue recognition timing change, which partially offset the impact of reduced selling days in the quarter. Strong performance in hips and knees was driven by strong procedure recovery and growth in new products. Trauma and spine were negatively impacted by competitive pressures. Worldwide Vision declined 3.3% due to lower sales of contact lenses, China VBP issues and the Blink divestiture.
In 2024, in the MedTech segment, J&J expects operational sales growth to be relatively consistent throughout the year. Procedure volumes are expected to be above pre-COVID levels with a modest impact from Russia sanctions in the first half and China VBP pricing impact in some categories.
2024 Outlook
J&J tightened its total revenue expectations from a range of $87.8 billion-$88.6 billion to $88.0 billion-$88.4 billion. The new sales range indicates growth in the range of 4.7%-5.2% compared with 4.5%- 5.5% expected previously.
Operational sales growth is expected in the range of 5.5, compared with 5 expected previously.
Adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth is also expected to be in the range of 5.5 compared with 5 expected previously.
The revenue figures exclude revenues from COVID-19 vaccine sales.
Foreign exchange is expected to hurt 2024 sales growth by approximately 0.8% versus the prior expectation of 0.5%.
Adjusted earnings per share are expected in the range of $10.57-$10.72 compared with $10.55-$10.75 expected previously. The earnings range implies growth in the range of 6.6%-8.1% (6.4%-8.4% expected previously).
On an operational, constant-currency basis, adjusted earnings per share are expected to increase in the range of 6.9%-8.4% (previously 6.4%-8.4%).
Adjusted pretax operating margin is expected to improve approximately 50 basis points from 2023.
Other income is expected to be in the range of $1.2 billion to $1.4 billion. Net interest income is expected in the range of $550 million to $650 million compared with $450 million to $550 million expected previously.
The adjusted tax rate is expected in the range of 16.0% to 17.5%.
The 2024 financial guidance excludes any impact from the pending acquisition of Shockwave. The transaction is expected to close in mid-2024. J&J is likely to update its guidance to reflect the expected dilution to adjusted earnings per share in 2024 of approximately 10 cents per share due to financing costs.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Johnson & Johnson has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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.