Updated Version 1 - Johnson & Johnson Exceeds Performance Expectations; Middle East Conflict Drags Medical Device Sales
The second paragraph adds stock price information, and the ninth paragraph provides a detailed introduction of the orthopedics division, with an accompanying chart
Michael Erman
Reuters, October 13 - Johnson & Johnson (JNJ.N) on Tuesday reported earnings slightly above expectations, mainly due to strong sales of the immunology drug Tremfya, but geopolitical issues including the Middle East conflict weighed on its medical device business.
The company’s stock fell more than 2% in premarket trading.
According to London Stock Exchange Group (LSEG) data, the company posted third-quarter revenue of $25.4 billion, higher than the analyst consensus estimate of $25.28 billion. Adjusted earnings per share of $2.59 also exceeded Wall Street estimates of $2.54.
Pharmaceutical sales for the quarter jumped 7.7% to $16.76 billion. The medical technologies division saw sales increase only 2.5%, totaling $8.6 billion. Outside the United States, sales in the division were essentially flat.
Johnson & Johnson CFO Joe Wolk said in an interview that the Middle East conflict (link), austerity measures in Europe, and pricing issues in China continued to pressure international results, “but the impact may be a bit more pronounced.”
He stated that the Middle East conflict has caused domestic and international fuel costs to spike, which has not yet affected the company’s costs but has hurt sales in the region.
“These countries still value and truly want to have advanced healthcare systems, such as Kuwait, the UAE, and Saudi Arabia. They take pride in having robust and high-quality healthcare systems,” Wolk said, “but now, their budgets are being redirected to defense spending.”
Earlier this year, a UK study questioned the use of the Impella pump in some high-risk coronary surgeries (link), and sales in the company’s Abiomed heart pump business have remained sluggish since.
The company announced at the end of last year that it planned to spin off its orthopedics business. Wolk told The Wall Street Journal that Johnson & Johnson intends to separate its hip and knee divisions.
Tremfya sales rose 68% to $2.4 billion, exceeding analysts’ estimates of around $2.19 billion; Stelara, which is facing generic competition, saw a 54% decline in sales to $716 million, but still well above Wall Street’s expectation of $591 million. With recent approval in the inflammatory bowel disease field, Tremfya is increasingly making up for Stelara’s lost revenue.
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Sales of Darzalex, the blood cancer therapy, rose about 16% to $4.24 billion, missing the analyst target of $4.4 billion.
The company raised the midpoint of its full-year reported sales guidance to around $101.2 billion, up from the previous $101.1 billion. The company also raised its adjusted EPS forecast range, with the new midpoint at $11.10, up from $11.04 previously.
Johnson & Johnson stock closed at $263.73 on Monday. Year to date, the company's share price has risen by 27%, outperforming the broader market and most healthcare sector peers.
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