Johnson & Johnson (JNJ –Free J&J Stock Report), the world's largest maker of health care products and a Dow-30 member, reported third-quarter GAAP share earnings of $1.37, versus last year's haul of $1.57, and our $1.70 estimate. On an adjusted basis, which excludes amortization, restructuring costs, and expenses related to the $30 billion Actelion acquisition, share net was $1.90, compared with the prior year's $1.68 result. The company managed to reverse a trend of posting less-than-expected top-line growth, as sales (excluding acquisitions and divestitures) rose a solid 3.8%. Approximately 15%-20% of the increase was due to favorable currency translations.
The star performer during the period was the key Pharmaceutical sector, which now accounts for almost 50% of total sales. On an operation basis, revenues rose a healthy 6.7%. With Actelion figures being included for the first time, the number climbs to 14.6%. New products contributed to the strong showing, specifically, DARZALEX, used for the treatment of patients with multiple myeloma and IMBRUVICA, an oral once-daily therapy approved for fighting certain B-cell malignancies, a type of blood or lymph node cancer. Additional contributors included STELARA, a biologic used for the treatment of a number of immune-mediated inflammatory diseases, XALELTO, an anticoagulant, ZYTIGA, a medication for patients with metastatic, prostate cancer, and SUSTENNA, an injectable atypical antipsychotic targeted to help adults suffering from schizophrenia.
Responsible for about a third of total revenues, Medical Device segment sales rose 7.1% in the September period. Deducting the part attributable to the Abbott Medical Optics acquisition, the figure declines to a pedestrian 1.9%. Improvement in the Cardiovascular business, ACUVUE contact lenses in the Vision care unit, and wound closure products in the General Surgery division, were partially offset by a subpar showing in the Diabetes Care business.
The Consumer segment, the third and final part of the company (responsible for about 17% of total sales), continued to experience relatively weak demand. As an owner of some of the world's most iconic brands, including TYLENOL and NEUTRAGENA, this operation has struggled mostly as a result of lower demand for baby care products. Indeed, domestic sales fell 0.5% in the quarter, while international sales rose 3.0% over that same span.
Management raised sales and earnings guidance for the full-year 2017. The top line is expected to come in between $76.1 billion-$76.5 billion. This is $400 million higher than the company's last forecast. Moreover, the adjusted share-net estimate was hiked to $7.25-$7.30. The previous forecast was $7.12-$7.22 per share.
Conservative investors may want to consider this blue chip as a core holding. Besides having one of the best balance sheets of any publicly traded company, JNJ has a generous yield and well-defined earnings. Moreover, we view the shift toward the Pharmaceutical sector as a major positive, due to its promising pipeline of new drugs.
About The Company: Johnson & Johnson manufactures and sells health care products. Its major lines consist of numerous household products. The company operates in a diverse number of segments, including Consumer (baby care, nonprescription drugs, sanitary protection, and skin care), Medical Device & Diagnostics (wound closures, minimally invasive surgical instruments, diagnostics, orthopedics, and contact lenses), and Pharmaceutical (contraceptives, psychiatric, anti-infective, and dermatological drugs).
— James Flood
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
