J&J (JNJ) to Begin Q4 Earnings Season for Pharma Sector
Johnson & Johnson JNJ will report fourth-quarter and full-year 2022 results on Jan 24, before market open. In the last reported quarter, the company delivered an earnings surprise of 2.41%.
The healthcare bellwether’s performance has been pretty impressive, with the company exceeding earnings expectations in each of the trailing four quarters. It delivered a four-quarter earnings surprise of 1.59%, on average.
Johnson & Johnson Price and EPS Surprise
Johnson & Johnson price-eps-surprise | Johnson & Johnson Quote
J&J’s stock has risen 1.6% in the past year compared with an increase of 14% for the industry.
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Factors to Consider
J&J’s Pharma segment is expected to have contributed to the top line, led by increased penetration and market share gains of key products such as Darzalex and Stelara.
The Zacks Consensus Estimate for Darzalex and Stelara is pegged at $2.07 billion and $2.46 billion, respectively while our estimates are $2.11 billion and $2.45 billion, respectively.
Other core products like Invega Sustenna and new drugs, Erleada and Tremfya, might have also contributed significantly to sales growth. Its COVID-19 vaccine sales are expected to have been negligible in the fourth quarter. International sales are expected to have accounted for most of the COVID-19 vaccine sales.
However, lower sales of its key medicine, Imbruvica is likely to have hurt the top line in the fourth quarter. Rising competitive pressure in the United States from novel oral agents is likely to have hurt sales of the key drug, Imbruvica. Also, below pre-COVID levels in the CLL market are expected to have hurt sales in the United States and government clawbacks are expected to put pressure on sales in Europe.
The Zacks Consensus Estimate for Imbruvica is $873 million, while our estimate is $849.7 million.
Generic/biosimilar competition for drugs like Zytiga, Procrit/Eprex and Remicade is likely to have hurt the top line. Zytiga, which already faces generic competition in the United States, lost exclusivity in EMEA markets in September, which is likely to hurt sales further in the fourth quarter.
The Zacks Consensus Estimate for J&J’s Pharmaceuticals unit is $13.08 billion, while our estimate is $12.8 billion.
With regard to the MedTech segment, sales are expected to have been driven by continued recovery in worldwide procedure volumes, better execution and new product launches. However, lingering headwinds from hospital staffing and volume-based procurement (VBP) issues in China are expected to have hurt international sales. The Zacks Consensus Estimate for J&J’s MedTech segment is $6.97 billion, while our model estimate is $7.06 billion.
In the Consumer Health segment, supply constraints in the United States (due to raw material availability and labor shortages), inflationary pressure and sales suspension of personal care products in Russia are likely to have continued to hurt sales. However, strategic price increases, and above-market growth in the over-the-counter medicines business, seen in the previous quarters, is likely to have benefited the top line.
The Zacks Consensus Estimate for J&J’s Consumer Health segment is $3.73 billion, while our model estimate is $3.7 billion.
Overall, currency headwinds are expected to have significantly hurt J&J’s top line in the fourth quarter.
J&J expects supply constraints, inflationary pressure and rising input costs to continue to hurt margins in the fourth quarter of 2022 as well as in 2023
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for J&J this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.
Earnings ESP: J&J’s Earnings ESP 0.00% as both the Zacks Consensus Estimate as well as the Most Accurate Estimate are pegged at $2.22 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: J&J has a Zacks Rank #3.
Stocks to Consider
Here are some large drug stocks that have the right combination of elements to beat on earnings this time around:
Merck MRK has an Earnings ESP of +1.20% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Merck’s stock has risen 35.1% in the past year. Merck beat earnings estimates in all of the last four quarters. MRK has a four-quarter average earnings surprise of 16.07%, on average. Merck is scheduled to release its fourth-quarter results on Feb 2
Novo Nordisk NVO has an Earnings ESP of +11.25% and a Zacks Rank #2.
Novo Nordisk’s stock has risen 44.6% in the past year. Novo Nordisk topped earnings estimates in three of the last four quarters and has a four-quarter earnings surprise of 3.09%, on average. NVO is scheduled to release its fourth-quarter results on Feb 1.
Sanofi SNY has an Earnings ESP of +2.22% and a Zacks Rank #2.
Sanofi’s stock has declined 5.1% in the past year. Sanofi beat earnings estimates in all the last four quarters. SNY has a four-quarter average earnings surprise of 9.50%, on average. SNY is scheduled to release its fourth-quarter results on Feb 3.
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