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J&J (JNJ) Q4 Earnings & Sales Beat, 2021 Guidance Upbeat

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Zacks Equity Research
·6 min read
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Johnson & Johnson’s JNJ fourth-quarter 2020 earnings came in at $1.86 per share, which beat the Zacks Consensus Estimate of $1.81. Earnings however declined 1.1% from the year-ago period.

Adjusted earnings exclude intangible amortization, restructuring and acquisition-related expenses and some other special items. Including these items, J&J reported fourth-quarter earnings of 65 cents per share, down 56.7% from the year-ago quarter.

Sales of this drug and consumer products giant came in at $22.48 billion, which beat the Zacks Consensus Estimate of $21.62 billion. Sales rose 8.3% from the year-ago quarter, reflecting an operational increase of 7.1% and a currency impact of 1.2%.

Organically, excluding the impact of acquisitions and divestitures, sales rose 7.3% on an operational basis compared with 2% increase seen in the third quarter.

Fourth-quarter sales in the domestic market rose 9.6% to $11.81 billion. International sales rose 7% on a reported basis to $10.68 billion, reflecting an operational increase of 4.3% and a currency impact of 2.7%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 4.8% in the quarter.

Segment Details

Pharmaceutical segment sales rose 16.3% year over year to $12.27 billion, reflecting 14.6% operational growth and 1.7% positive currency impact. Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales increased 14.6%, higher than 4.7% increase in the third quarter.

The sales increase was led by higher penetration and new indications across key products, such as Darzalex, Imbruvica and Stelara.Other core products like Invega Sustenna, J&J’s pulmonary arterial hypertension (PAH) drugs and new drugs, Erleada and Tremfya contributed significantly to sales growth.

Moreover, improvement in sales of some other key drugs like Xarelto and Invokana/Invokamet seen in the past few quarters continued into the fourth quarter of 2020. The sales growth was hurt by generic/biosimilar competition to drugs like Zytiga and Remicade and some negative impact of COVID-19.

Darzalex sales rose 50.9% year over year to $1.25 billion in the quarter. Stelara sales grew 31.9% to $2.24 billion in the quarter. Imbruvica sales rose 27.8% to $1.18 billion. J&J markets Imbruvica in partnership with AbbVie ABBV.

PAH revenues of $865 million rose 39% year over year, driven by strong sales growth for Uptravi and Opsumit. Invega Sustenna sales rose 10.8% to $965 million in the quarter. Simponi/Simponi Aria sales grew 12.1% to $576 million and Prezista sales increased 4.4% to $569 million.

Xarelto sales rose 3.1% in the quarter to $629.0 million, while sales of Invokana/Invokamet improved 22.9% to $217.0 million.

Among the newer medicines, Erleada generated sales of $241 million in the quarter compared with $206 million in the previous quarter. Tremfya recorded sales of $382 million in the quarter, up 41.5% year over year.

Zytiga sales declined 8.3% to $622 million in the quarter due to generic competition. Sales of Procrit/Eprex declined 29.5% to $129 million in the quarter due to biosimilar competition. Sales of Remicade were down 12.9% in the quarter to $901 million. J&J markets Remicade in partnership with Merck MRK.

Medical Devices segment sales came in at $6.59 billion, down 0.7% from the year-ago period, reflecting an operational decrease of 2.2% and a positive currency movement of 1.5%. The pandemic hit this segment the hardest due to a widespread decline in elective surgical procedures. However, the segment benefited from better-than-expected market recovery in the second half of 2020 amid faster-than-expected ramping up of medical procedures.

Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales decreased 1.5% compared with a decline of 3.3% in the third quarter.

The Consumer segment recorded revenues of $3.62 billion in the reported quarter, up 1.4% year over year. On an operational basis, Consumer segment sales rose 2%. Unfavorable foreign currency movement hurt sales by 0.6%.

Excluding the impact of acquisitions and divestitures, adjusted operational sales increase was 2.1% worldwide compared with a 3.1% increase seen in the third quarter.

2020 Results

Full-year 2020 sales rose 0.6% to $82.58 billion, beating the Zacks Consensus Estimate of $81.77 billion. Sales were slightly above the guided range of $81.2-$82.0 billion.

Adjusted earnings for 2020 were $8.03 per share, which surpassed the Zacks Consensus Estimate of $7.98 and but were down 7.5% year over year. Earnings were within the guided range of $7.95 - $8.05.

2021 Outlook

J&J issued an upbeat financial guidance for 2021. It expects revenues in the range of $90.5 billion to $91.7 billion, indicating year-over-year increase of 9.5%-11%.The Zacks Consensus Estimate stands at $88.72 billion.

Operational constant-currency sales are expected to increase in the range of 7.5%-9%.Adjusted operational sales, (excluding currency impact, acquisitions/divestitures) are expected to be up 8%-9.5%

Adjusted earnings per share are expected in the range of $9.40-$9.60, indicating an increase in the range of 17.1%-19.6%. The Zacks Consensus Estimate stands at $8.89 per share. On an operational, constant-currency basis, adjusted earnings per share are expected to increase 15.2%-17.7%.

Update on Coronavirus Vaccine Study

J&J is conducting ENSEMBLE phase III study on its single-dose COVID-19 vaccine candidate, JNJ-78436735, which has enrolled approximately 45,000 participants. Along with the earnings press release, the company said it expects to report interim efficacy data from the ENSEMBLE study soon. The company had previously said that it expected to publish data from the study by the end of January.

Our Take

J&J beat fourth-quarter estimates for earnings as well as sales. Its Pharmaceuticals unit continued to do well. Meanwhile, increasing demand for its Consumer Health products and continued procedure recovery in Medical Devices provided top-line support.

Importantly, J&J’s guidance for 2021 topped investor expectations, pushing shares up 2% in pre-market trading. In the past year, J&J’s shares have risen 11.6% compared with the industry’s 8.4% growth.

Investors are eagerly awaiting phase III data on J&J’s potential single-dose vaccine for COVID-19.

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.

A better-ranked large biotech stock is Alexion Pharmaceuticals ALXN with a Zacks Rank #2 (Buy).

Alexion’s shares have gained 53.2% in the past year while its earnings estimates for 2021 have risen 2.9% over the past 90 days.

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