J&J (JNJ) Beats on Q2 Earnings & Sales, Lowers 2022 Guidance
Johnson & Johnson’s JNJ second-quarter 2022 earnings came in at $2.59 per share, which beat the Zacks Consensus Estimate of $2.57. Earnings increased 4.4% from the year-ago period.
Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported second-quarter earnings of $1.80 per share, down 23.4% from the year-ago quarter.
Sales of this drug and consumer products giant came in at $24.02 billion, which marginally beat the Zacks Consensus Estimate of $23.91 billion. Sales rose 3% from the year-ago quarter, reflecting an operational increase of 8% and a negative currency impact of 5%.
Organically, excluding the impact of acquisitions and divestitures, sales rose 8.1% on an operational basis compared with a 7.9% increase seen in the previous quarter.
Second-quarter sales in the domestic market rose 2.3% to $12.2 billion. International sales rose 3.8% on a reported basis to $11.8 billion, reflecting an operational increase of 13.9% and a negative currency impact of 10.1%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 14.2% in the quarter.
Segment Details
Pharmaceutical segment sales rose 6.7% year over year to $13.3 billion, reflecting 12.3% operational growth and 5.6% negative currency impact. Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales rose 12.4%.
The year-over-year 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 relatively newer drugs, Erleada and Tremfya contributed significantly to sales growth. Also, contributing to growth was sales of J&J’s single-dose COVID-19 vaccine. The sales growth was, however, dampened by lower sales of key medicine, Imbruvica and generic/biosimilar competition to drugs like Zytiga and Remicade.
Darzalex sales rose 38.6% year over year to $1.99 billion in the quarter. Stelara sales grew 14.3% to $2.6 billion in the quarter.
Imbruvica sales declined 13.1% to $970 million. Rising competitive pressure in the United States due to new oral competition has been hurting sales of Imbruvica since the past few quarters.
PAH revenues of $843 million declined 3.1% year over year. Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales rose 2.9% to $1.05 billion in the quarter. Simponi/Simponi Aria sales declined 3% to $566 million while Prezista sales decreased 7.9% to $464 million.
Xarelto sales rose 7.1% in the quarter to $609 million while sales of Invokana/Invokamet declined 24.9% to $120 million.
Among the newer medicines, Erleada generated sales of $450 million in the quarter, up 49.5% year over year. Tremfya recorded sales of $597 million in the quarter, up 24.4% year over year.
Zytiga sales declined 10.3% to $505 million in the quarter due to generic competition. Sales of Remicade were down 27.2% in the quarter to $647 million.
J&J’s single-dose COVID-19 vaccine generated sales of $544 million in the second quarter compared with $457 million in the first quarter. International sales accounted for most of the COVID-19 vaccine sales. Please note that J&J is selling its vaccine on a not-for-profit basis.
The MedTech segment sales came in at $6.9 billion, down 1.1% from the year-ago period, as an operational increase of 3.4% was offset by a negative currency movement of 4.5%.
Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales rose 3.4%.
The Consumer segment recorded revenues of $3.81 billion in the reported quarter, down 1.3% year over year, reflecting a 2.3% operational increase and a 3.6% negative currency impact.
Excluding the impact of acquisitions and divestitures, adjusted operational sales rose 2.9% worldwide. External supply constraints (due to raw material availability and labor shortages) and inflationary pressure have been hurting sales in J&J’s Consumer segment since the past couple of quarters.
2022 Outlook
J&J lowered its earnings and sales expectations for 2022 mainly due to a greater-than-expected negative impact from currency movements.
J&J expects to generate revenues in the range of $93.3 billion to $94.3 billion, lower than $94.8 billion to $95.8 billion guided previously. This guidance excludes any revenues from J&J’s COVID-19 vaccine. Revenue growth is expected in the range of 2.1% – 3.1%, lower than 3.8% – 4.8% expected previously.
Excluding the COVID-19 vaccine, operational constant-currency sales are expected to increase in the range of 6.5%-7.5%, the same as previous expectations.
The adjusted earnings per share guidance was lowered from a range of $10.15-$10.35 per share to $10.00-$10.10.
The earnings range indicates an increase of 2.1%-3.1%, lower than 3.6%-5.6% expected previously. On an operational, constant-currency basis, adjusted earnings per share are expected to increase 8.7% – 9.7% versus the prior expectation of 8.2%-10.2%.
Our Take
J&J reported better-than-expected second-quarter results as it beat estimates for both earnings and sales. Its Pharmaceuticals unit sales continued to do well. However, sales in the MedTech segment were partly hurt by COVID-related restrictions in several countries. Its COVID-19 vaccine sales improved in the second quarter after a lower-than-expected contribution in the first quarter. In April, J&J suspended the previously issued sales guidance for its COVID-19 vaccine due to global surplus supply and demand uncertainty.
However, J&J slightly lowered its sales and profit outlook for the year due to expected currency headwinds amid a strengthening U.S. dollar.
J&J’s shares were up 1% in pre-market trading. This year so far, J&J’s shares have risen 1.8% compared with the industry’s 5.7% growth.
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J&J plans to separate its Consumer Health segment into a new publicly-traded company, leaving behind a new J&J with its Pharmaceuticals and MedTech units. The separation is expected to be executed in 2023.
Zacks Rank and Stocks to Consider
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
Some better-ranked stocks from the same space include Merck MRK, Bayer BAYRY and AbbVie ABBV. While Bayer sports a Zacks Rank of 1, Merck and AbbVie have a Zacks Rank of 2 (Buy).
Merck’s stock has risen 20.4% this year so far. Earnings estimates for 2022 have gone up from $7.19 per share to $7.31 per share, while that for 2023 have increased from $7.12 per share to $7.15 per share over the past 90 days.
Merck topped earnings estimates in three of the last four quarters. Merck has a four-quarter earnings surprise of 13.42%, on average.
Bayer’s stock has risen 4.7% this year so far. Earnings estimates for 2023 have gone up from $2.13 per share to $2.17 per share over the past 90 days.
Earnings of Bayer beat estimates in each of the last four quarters, the average surprise being 17.71%.
AbbVie stock is up 10.4% this year so far. Earnings estimates for 2023 have gone up from $11.81 per share to $11.86 per share over the past 60 days.
Earnings of AbbVie beat estimates in three of the last four quarters and were in line on one occasion, the average surprise being 1.01%.
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