Perennial health care giant Johnson & Johnson (JNJ
136.26, +2.31, +1.7%) recoups a decent chunk of its recent broader
market-driven selloff on Tuesday following a boost to the full year 2018
outlook and an equally impressive third quarter performance.
Johnson & Johnson, which operates mainly in the pharmaceutical and medical device market, reported worldwide sales growth of 3.6% to $20.35 bln, reflecting International sales growth of 3.5%, operational growth of 7.5%, and a negative currency impact of 4.0%. Excluding the net impact of acquisitions and divestitures, on an operational basis, worldwide sales increased 6.1%, domestic sales increased 3.9%, and international sales increased 8.5%. Excluding after-tax intangible amortization expense and special items, adjusted net earnings for the current quarter were $2.05.
By segment, Worldwide Consumer sales of $3.4 bln for Q3 represented an increase of 1.8% versus the prior year, consisting of an operational increase of 4.9% and a negative impact from currency of 3.1%. Domestic sales increased 6.6%, while international sales decreased 1.3%, which reflected an operational increase of 3.7% and a negative currency impact of 5.0%. Excluding the net impact of acquisitions and divestitures, on an operational basis, worldwide sales increased 6.1%, with domestic sales increasing 6.4% and international sales increasing 5.9%.
Worldwide Pharmaceutical sales were up 6.7% in Q3 to $10.3 bln with an operational increase of 8.2% and a negative impact from currency of 1.5%. Domestic sales increased 4.8%, international sales increased 9.5%, which reflected an operational increase of 13.2% and a negative currency impact of 3.7%. JNJ noted acquisitions and divestitures had a negligible impact to sales growth in the quarter. Management highlighted that growth as in prior quarters was a result of JNJ’s approach to innovation and delivering transformational products. Management stated that growth continues to be driven by volume rather than price.
Worldwide Q3 sales of multiple myeloma treatment Darzalex came in slightly below market expectations at $498 mln, while immune-mediated inflammatory disease treatment, Stelara, saw Q3 sales beat market views on growth of 16.6% to $1.31 bln. The company’s treatment for Crohn’s Disease and Ulcerative Colitis, Remicade, didn’t fare as well in the quarter, as worldwide sales dropped 16% to $1.38 bln due in part to increased competition from biosimilars.
Worldwide Medical Devices sales dipped 0.2% to $6.6 bln in Q3 consisting of an operational increase of 1.7% and a negative currency impact of 1.9%. Domestic sales increased 0.3%, while international sales decreased 0.6%, which reflected an operational increase of 3.0% and a negative currency impact of 3.6%. Excluding the net impact of acquisitions and divestitures, on an operational basis, worldwide sales increased 2.9%, domestic sales increased 1.2%, and international sales increased 4.4%. On the conference call this morning, JNJ management made known their displeasure with the Medical Device performance this period; the company also stated that selling days had a negligible impact on Medical Devices in Q3, and as previously communicated, the company doesn't expect a material impact globally for the remainder of this year but expects that there could be some variances by region.
On the conference call this morning, JNJ management highlighted pricing pressure that continued to impact all categories in Orthopaedics. For the quarter, U.S. pure price was negative across all platforms by approximately negative 6% in spine, negative 3.5% in hips, negative 2.5% in knees, and negative 2% in trauma.
Johnson & Johnson also updated sales guidance for the FY18 to a range of $81.0-81.4 bln from the previous $80.5-81.3 bln. This reflects an increase in expected operational growth to a range of 5.5% to 6.0%, partially offset by the estimated lower favorable impact of currency. Additionally, JNJ increased its adjusted earnings guidance for FY18 to a range of $8.13-8.18 per share from the prior $8.07-8.17 outlook. This reflects an increase in expected operational EPS growth to a range of 9.3% to 10.0%.
Additionally, although year-to-date performance suggests improvement, JNJ expects investments in Q4 will result in the full year pre-tax operating margin improvement of at least 150 basis points. The company suggests modeling net interest expense between $450-500 mln.
What’s more, management’s guidance from the release today includes erosion due to the biosimilar competition impacting REMICADE, continued generic competition for CONCERTA and VELCADE and the expected generic and biosimilar competition to TRACLEER and PROCRIT later this year.
With today’s move, JNJ moves closer to unchanged levels year-to-date. In recent trade, though, shares are seeing some resistance in the 50-day simple moving average (136.45).
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