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Johnson & Johnson (JNJ +3%) is modestly higher after reporting Q3 earnings results. The move is pretty tame considering this was JNJ's largest EPS beat in three years. Revenue rose 5.2% yr/yr to $22.47 bln, a bit better than expected. However, the FY24 guidance was a bit soft as JNJ lowered its adjusted EPS outlook to $9.88-9.98 from $9.97-10.07 and that is despite the strong upside in Q3. JNJ did increase its reported revenue outlook a bit to $88.40-88.80 bln from $88.00-88.40 bln.

• Innovative Medicine segment (formerly known as Pharma) sales in Q3 grew 4.9% yr/yr (+6.3% operational) to $14.58 bln with growth of 7.5% in the US and 4.4% outside of the US. IM segment growth was driven by JNJ's key brands and continued uptake from recently launched products with 11 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price increases associated with Argentina hyperinflation.
• JNJ says it continues to drive strong sales across its multiple myeloma portfolio. DARZALEX growth was 22.9% primarily driven by share gains across all lines of therapy. CARVYKTI posted 87% yr/yr growth and 53.2% sequential growth to $286 mln, driven by share gains, capacity expansion and manufacturing efficiencies.
• Turning to its MedTech segment, reported sales grew 5.8% yr/yr (+6.4% operational) to $7.89 bln with growth in the US of 7.8% and 5% outside of the US. MedTech segment growth benefitted from commercial execution and new product introductions, but was partially offset by continued headwinds in Asia Pacific, specifically in China. In Cardiovascular, electrophysiology delivered double-digit growth of 10.7% driven by global procedure growth and new product uptake. Abiomed was a bright spot with revs up 16.3% with strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology.
• JNJ has bolstered its Cardiovascular segment within MedTech with its recent acquisitions of Abiomed and then Shockwave Medical. Cardiovascular intervention is one of the fastest-growing global medtech markets. JNJ is now a category leader for the highest growth Cardiovascular intervention MedTech markets. In Q3, that translated to another quarter of double-digit growth, which benefitted from the full market launch of the Shockwave E8 refill IVL Catheter.
• In terms of the weakish guidance, it sounds like JNJ is being more cautious due to the Asia-Pacific region and specifically China. It is now taking a more conservative approach by assuming no material improvement in that part of the business for the remainder of the year. As such, JNJ lowered its adjusted operational sales growth for 2024 to be closer to 5% vs 6% prior guidance.

Overall, this was a decent but not great quarter. The EPS upside was impressive, but the guidance was a letdown as China remains a drag in the near term, especially on the MedTech side. On the other hand, it was good to see Abiomed and Shockwave performing well. These acquisitions increased JNJ's exposure to some higher growth markets. However, this was not enough to get the stock moving.