J&J (JNJ) Beats Q3 Earnings & Sales Estimates Post Spin-Off
Johnson & Johnson’s JNJ third-quarter 2023 earnings came in at $2.66 per share, which beat the Zacks Consensus Estimate of $2.52. Earnings rose 19.3% from the year-ago period.
Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported third-quarter earnings of $1.69 per share, up 4.3% from the year-ago quarter.
Sales of this drug and medical devices giant came in at $21.35 billion, beating the Zacks Consensus Estimate of $21.00 billion. Sales rose 6.8% from the year-ago quarter, reflecting an operational increase of 6.4% and a positive currency impact of 0.4%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 4.9% on an operational basis.
Third-quarter sales in the domestic market rose 11.1% to $12.0 billion. International sales rose 1.6% on a reported basis to $9.36 billion, reflecting an operational increase of 0.7% and a positive currency impact of 0.9%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 0.3% in the quarter.
In May 2023, J&J spun off its Consumer Health segment into a newly listed company called Kenvue KVUE, which began trading on the New York Stock Exchange with effect from May 4. J&J owned 89.6% of the total outstanding shares of Kenvue’s common stock then and was the majority shareholder. In August, J&J made an exchange offer for shares of Kenvue that it owned to complete the separation. After completion of the exchange offer, J&J now has a 9.5% stake in Kenvue’s common stock, which it may monetize in a tax-efficient manner in 2024.
With the complete separation of the Consumer Health segment, J&J has now become a two-sector company focused on the Pharmaceutical and MedTech fields. Kenvue now operates as a separate and fully independent company. The third-quarter results will be the first quarterly update for the new J&J after the Consumer Health spin-off.
In the third quarter, J&J presented its Consumer Health business as discontinued operations in its financial statements and recorded a one-time non-cash gain of approximately $21 billion in the quarter.
Segment Details
Sales in J&J’s Innovative Medicines segment (previously the Pharmaceutical segment) rose 5.1% year over year to $13.89 billion, reflecting a 4.3% operational increase and a 0.8% positive currency impact. Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 4.4%. Innovative Medicines sales beat the Zacks Consensus Estimate of $13.37 billion as well as our model estimate of $13.27 billion.
Excluding sales from J&J’s COVID-19 vaccine, operational sales grew 8.2%.
Higher sales of key products such as Darzalex, Stelara, Tremfya and Erleada drove the segment’s growth. New drugs like Carvykti and Spravato also contributed to growth. The sales growth was dampened by lower sales of Imbruvica and generic/biosimilar competition to drugs like Zytiga and Remicade.
Darzalex sales rose 21.8% year over year to $2.5 billion in the quarter. Sales slightly missed the Zacks Consensus Estimate of $2.54 billion and our model estimate of $2.57 billion. Stelara sales grew 16.9% to $2.86 billion in the quarter. Stelara sales beat the Zacks Consensus Estimate of $2.64 billion and our model estimate of $2.65 billion.
Imbruvica sales declined 11.3% to $808.0 million. Rising competitive pressure in the United States due to new oral competition has been hurting sales of Imbruvica for the past few quarters. Imbruvica sales were however better than the Zacks Consensus Estimate of $771.0 million and our estimate of $759.0 million.
Erleada generated sales of $631 million in the quarter, up 28.7% year over year. Erleada sales beat our model estimate of $614.3 million. Tremfya recorded sales of $891 million in the quarter, up 22.2% year over year. Tremfya beat the Zacks Consensus Estimate of $801 million as well as our model estimate of $867.9 million.
New drug Carvykti, a BCMA CAR-T therapy approved for relapsed or refractory multiple myeloma, recorded sales of $152 million compared with $117 million in the previous quarter. The new drug Spravato, approved for treatment-resistant depression, recorded sales of $183.0 million, compared with $169.0 million in the previous quarter.
PAH revenues of $954 million rose 12% year over year. Xarelto sales declined 9.4% in the quarter to $625 million.
Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales declined 0.2% to $1.03 billion in the quarter. Simponi/Simponi Aria sales rose 15.3% to $629.0 million, while Prezista sales declined 7.8% to $447 million.
Zytiga sales declined 53% to $214.0 million in the quarter due to generic competition. Sales of Remicade were down 17.4% in the quarter to $461 million.
MedTech segment sales came in at $7.46 billion, up 10% from the year-ago period, as an operational increase of 10.4% was offset by a negative currency movement of 0.4%. MedTech segment sales missed the Zacks Consensus Estimate of $7.59 billion as well as our model estimate of $7.70 billion.
Excluding the impact of all acquisitions and divestitures and currency, on an adjusted operational basis, worldwide sales rose 6%. Abiomed, acquired last year, contributed 4.6% of sales growth.
Raised 2023 Guidance
In August, J&J provided updated financial guidance for 2023, following the complete separation of Kenvue. Along with its third-quarter results, J&J updated these ranges.
J&J now expects revenues in the range of $83.6 billion-$84.0 billion compared with the earlier expectation of $83.2 billion-$84.0 billion. Revenue growth is now expected in the range of 7.5%-8% versus the prior expectation of 7%-8%. All revenue figures exclude any revenues from the COVID-19 vaccine sales.
Operational constant-currency sales are expected to increase in the range of 8.5%-9.0% compared with the prior expectation of 7.5%-8.5%. Adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth is now expected to be in the range of 7.2%-7.7% (prior expectation of 6.2%-7.2%).
The adjusted earnings per share guidance was widened from a range of $10.00-$10.10 to $10.07-$10.13. The earnings range implies growth in the range of 12.7%-13.3% compared with 12%-13% previously.
Our Take
J&J reported strong third-quarter results, beating estimates for earnings as well as sales. Its Innovative Medicines unit outperformed expectations, with sales of several key drugs like Stelara, Tremfya and Imbruvica beating estimates. J&J raised its full-year guidance for adjusted earnings and sales growth.
J&J’s shares rose modestly in pre-market trading in response to the upbeat results and guidance increase. Year to date, J&J’s shares have declined 10.8% against the industry’s 8.5% increase.
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J&J’s Pharma unit is performing at above-market levels. Growth in 2023 is being driven by key products like Darzalex, Tremfya, Erleada, Invega Sustenna and Uptravi, and also continued uptake from new launches, including Spravato, Carvykti and Tecvayli. The MedTech unit is showing improving trends, driven by a recovery in surgical procedures and contribution from new products.J&J has taken meaningful steps to resolve its talc and opioid litigation.
Zacks Rank and Stocks to Consider
J&J currently has a Zacks Rank #4 (Sell).
Johnson & Johnson Price and Consensus
Johnson & Johnson price-consensus-chart | Johnson & Johnson Quote
Some better-ranked drug/biotech companies worth considering are Aurinia Pharmaceuticals AUPH and MEI Pharma MEIP, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 90 days, the bottom line estimate for Aurinia Pharmaceuticals for 2023 has narrowed from a loss of 71 cents per share to a loss of 58 cents per share, while the same for 2024 has narrowed from a loss of 43 cents per share to a loss of 27 cents per share. Year to date, shares of Aurinia Pharmaceuticals have gained 83.3%.
Earnings of Aurinia Pharmaceuticals beat estimates in all the last four quarters, delivering an earnings surprise of 45.61% on average.
In the past 90 days, the Zacks Consensus Estimate for MEI Pharma’s loss per share has narrowed from $6.54 to $4.89 for 2023. The bottom-line estimate for 2024 has also improved from a loss of $5.14 to a loss of $4.02 during the same time frame. Shares of the company have rallied 40.4% year to date.
MEIP’s earnings beat estimates in three of the trailing four quarters while meeting the same in one, delivering an average earnings surprise of 53.58%.
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