Johnson & Johnson said Tuesday its profit jumped 42% in the second quarter, with all three of the sprawling health-care company’s businesses performing better than Wall Street expected.
Here’s what the company reported compared with Wall Street estimates, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.58, adjusted, vs. $2.46 expected
- Revenue: $20.56 billion vs. $20.29 billion expected
J&J makes everything from Acuvue contacts to cancer drugs like Zytiga to Aveeno lotion.
The company reported second-quarter net income of $5.61 billion, or $2.08 per share, a 42% increase from the $3.95 billion, or $1.45 per share, it posted a year earlier. Excluding an intangible amortization expense and special items, J&J earned $2.58 per share, beating the $2.46 per share expected by analysts surveyed by Refinitiv.
SVB Leerink analyst Danielle Antalffy estimates other income, particularly J&J’s divestiture of its Advanced Sterilization Products business, boosted J&J’s quarterly earnings by about 20 cents.
Net sales dropped 1.3% to $20.56 billion but still came in above analysts’ expectations of $20.29 billion.
J&J’s pharmaceutical business, which accounts for half of the company’s revenue and includes psoriasis drugs like Stelara and Tremfya, posted revenue of $3.54 billion, better than the $3.52 billion analysts expected, according to estimates compiled by StreetAccount.
J&J’s consumer unit, which makes Aveeno body care and J&J’s namesake baby products, reported revenue of $3.54 billion, topping the $3.52 billion analysts expected. Its medical device business, which includes Acuvue contacts and Ethicon surgical products, reported revenue of $6.49 billion. Analysts had expected $6.43 billion.
J&J boosted its full-year sales forecast to between $80.8 billion and $81.6 billion, up from the previously projected range of $80.4 billion to $81.2 billion. The company did not raise its earnings forecast, reiterating its prior estimate of adjusted earnings in the range of $8.53 to $8.63 per share.
“If you look at our earnings growth this year, we’re maintaining it, it’s two times the rate of sales growth,” J&J Chief Financial Officer Joe Wolk told CNBC’s “Squawk Box.” “We think that’s very healthy, and we look to the long term, so this gives us a great opportunity to invest in our portfolio, to either accelerate, fortify or even add to our pipeline going forward so that we do solidify not just the next six months, but many, many, many more years to come.”
Shares of J&J fell 0.5% in premarket trading.
The company is trying to balance declining sales from some of its top drugs, like Zytiga, while introducing new ones, like Spravato.
Sales of Zytiga declined 23% year over year, with the prostate cancer drug facing competition from generic drugs in the U.S. after losing patent protection last fall. Revenue from Remicade, used to treat arthritis and some bowel conditions and skin conditions, dropped 16% from the year-earlier quarter. The declines were not as steep as analysts had feared.
One weakness Antalffy pointed to was a 19% decrease in sales of its blood thinner Xarelto.
Unrelated to J&J’s quarterly results, Antalffy said “the biggest thing” on her mind is the company’s exposure to talc and opioid litigation.
Oklahoma is suing J&J, saying the opioid “kingpin” fueled the state’s opioid epidemic. J&J also faces thousands of lawsuits claiming its talc-based baby powder caused ovarian cancer and mesothelioma, threatening the company’s family-friendly image. The company has fought the charges and insists its baby powder is safe.
The company set aside $190 million in the quarter to defend itself in talc lawsuits, Wolk told CNBC.
“As a CFO, I consider costs as a potential settlement opportunity, but our overarching strategy is to continue to defend ourselves for this product when the facts are so overwhelmingly on our side,” Wolk said.
J&J’s stock slid nearly 4% last week after Bloomberg reported that a grand jury is examining documents as part of a criminal probe whether J&J lied about the possible cancer risks of its talcum powder.
Wolk said the report was “not new news” and “the surprise, if anything, was the fact it was considered news.” J&J disclosed in February that it had received subpoenas.
“We’re complying fully and cooperating fully with the Department of Justice,” he said. “It’s an astute organization, and I’m sure once they go through the facts they’ll come to the same conclusions that the company acted responsibly and the product is safe.”
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