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J&J (JNJ) Beats on Q1 Earnings, Cuts View on Coronavirus Impact

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Johnson & Johnson JNJ first-quarter 2020 earnings came in at $2.30 per share, which beat the Zacks Consensus Estimate of $2.03. Earnings rose 9.5% from the year-ago period.

Adjusted earnings exclude after-tax intangible amortization expense and some special items. Including these items, J&J reported first-quarter earnings of $2.17 per share, up 56.1% from the year-ago quarter.

Sales of the drug and consumer products giant came in at $20.69 billion, which beat the Zacks Consensus Estimate of $19.25 billion. Sales rose 3.3% from the year-ago quarter, reflecting an operational increase of 4.8%, which offset an unfavorable currency impact of 1.5%.

Organically, excluding the impact of acquisitions and divestitures, sales increased 5.6% on an operational basis, higher than 3.4% increase seen in the previous quarter.

Sales improved sequentially in Pharmaceutical and Consumer Health segments on an organic basis but declined in the Medical Devices unit.

First-quarter sales in the domestic market rose 5.6% to $10.7 billion. International sales grew 1% to $9.99 billion (operational increase of 4.0%). Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 4.5% in the quarter.

Segment Details

Pharmaceutical segment sales rose 8.7% year over year to $11.1 billion, reflecting 10.1% operational growth, which was offset by 1.4% negative currency impact. Sales in the domestic market rose 8.6% to $6.06 billion. International sales grew 8.8% to $5.07 billion (operational increase of 12.0%). Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales increased 10.2%, higher than 4.5% increase in the previous quarter.

The sales increase was led by the company’s oncology drugs Imbruvica and Darzalex as well as psoriasis treatment, Stelara.

Worldwide sales of J&J’s oncology drugs rose 19.7% in the quarter to $3.01 billion. Other core products like Stelara, Simponi/Simponi Aria and Invega Sustenna also contributed to growth. Sales of new immunology medicine, Tremfya and prostate cancer drug, Erleada brought in additional sales.

Moreover, sales of some other key drugs like Xarelto declined in the quarter. Sales of others like Zytiga (United States), Remicade, Velcade (internationally) Procrit/Eprex declined due to the impact of generic/biosimilar competition.

Imbruvica sales rose 31.6% to $1.03 billion in the quarter. J&J markets Imbruvica in partnership with AbbVie (ABBV - Free Report) .

Darzalex sales rose 49.0% year over year to $937 million in the quarter. Stelara sales rose 29.5% to $1.82 billion in the quarter.PAH revenues of $745 million rose 13.7% year over year driven by strong share growth for Uptravi and Opsumit.

Simponi/Simponi Aria sales rose 1.1% to $529 million in the quarter. Prezista sales rose 10.8% to $579 million in the quarter.  Invega Sustenna sales rose 11.7% to $883 million in the quarter.

Tremfya recorded sales of $296 million in the quarter compared with $270 million in the previous quarter. Erleada generated sales of $143 million in the quarter compared with $116 million in the previous quarter.

Zytiga sales rose 1.6% to $690 million in the quarter as growth outside the United States was offset by sales decline in the United States due to generic competition.

Sales of Procrit/Eprex declined 31.6% to $155 million in the quarter due to biosimilar competition. Velcade sales declined 59% in the quarter to $108 million.

Xarelto sales declined 2.7% in the quarter to $527 million. Sales of Invokana/Invokamet declined 13.5% to $175 million.

Sales of Remicade were down 10.2% in the quarter to $990 million. J&J markets Remicade in partnership with Merck MRK

Medical Devices segment sales came in at $5.93 billion, down 8.2% from the year-ago period, reflecting an operational decrease of 6.9% and negative currency movement of 1.3%.

Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales decreased 4.8%, less than an increase of 2.7% in the previous quarter. The postponement of medical procedures following the coronavirus outbreak hurt demand for medical devices in the quarter.

The Consumer segment recorded revenues of $3.63 billion in the reported quarter, up 9.2% year over year. On an operational basis, Consumer segment sales increased 11.3%, partially offset by unfavorable foreign currency movement of 2.1%.

Excluding the impact of acquisitions and divestitures, adjusted operational sales growth was 11% worldwide, a significant improvement from 1.4% in the previous quarter.

Sales of over-the-counter products, which include Tylenol analgesics and Listerine mouthwash, grew, mainly due to increased demand related to the COVID-19 pandemic. Consumers stocked up these basic medicines and consumer products due to the global shutdowns.

2020 Guidance Lowered

J&J lowered its financial guidance for 2020 due to uncertainty related to the coronavirus pandemic.

Adjusted earnings per share expectations were lowered from a range of $8.95 - $9.10 to $7.50 to $7.90. The Zacks Consensus Estimate stands at $8.51 per share. The guidance range now indicates a decline in the range of 9%-13.6% versus prior expectation of growth of 3.1%-4.8%. On an operational, constant currency basis, adjusted earnings per share are expected to decline in the range of 7.3%-11.9%. The prior expectation was of growth in the range of 3.7%-5.4%. 

Revenues are now expected in the range of $77.5-$80.5 billion, indicating year-over-year decline of 2%-5.5%. Previous expectation for revenues was in the range of $85.4-$86.2 billion, indicating year-over-year growth of 4%-5%. The Zacks Consensus Estimate stands at $80.72 billion.

Operational constant currency sales are expected to be flat to down 3.5% compared to the prior expectation of growth in the range of 4.5%-5.5%. Adjusted operational sales, (excluding currency impact, acquisitions/divestitures) are expected to be down 3% to up 0.5% (previous expectation of growth of 5% to 6%).

Efforts to Combat Coronavirus

J&J announced in March that it has identifies a lead vaccine candidate for COVID-19 and expects to begin phase I human clinical studies on the same by September. J&J along with BARDA committed to provide global supply of more than one billion doses of a vaccine. J&J looks confident of having the first batch of COVID-19 vaccine available for emergency use authorization, on a not-for-profit basis, by early 2021. J&J also committed to invest more than $1 billion to co-fund vaccine research, development, and clinical testing along with BARDA.

In addition to the vaccine development efforts, J&J is also working with BARDA and other partners to screen Janssen's compounds with antiviral activity to identify potential treatments against coronavirus. 

Our Take

J&J first-quarter results were strong as it beat estimates for earnings as well as sales. Higher sales of its pharmaceutical and consumer healthcare products led to higher-than-expected sales in the quarter.

However, as expected it lowered its 2020 financial guidance to include the impact of the uncertainty surrounding the COVID-19 pandemic and costs related to investments that the company is making to combat the disease. Meanwhile, J&J announced a 6% increase in the quarterly dividend rate, from 95 cents per share to $1.01.

Shares were up more than 3% in pre-market trading. This year so far, J&J’s stock has declined 4.2% compared with a decrease of 6.6% for the industry.

 

 

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 and EPS Surprise

Johnson & Johnson price-consensus-eps-surprise-chart | Johnson & Johnson Quote

 

A better-ranked large cap stock is Eli Lilly & Company LLY, carrying a Zacks Rank #2 (Buy). Lilly’s stock has risen 9.9% this year so far.

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