Earnings Beat from J&J Again, View Up - Analyst Blog

By
A A A
Share |

Johnson & Johnson ( JNJ ) beat expectations yet again with third-quarter 2013 earnings (excluding special items) coming in at $1.36 per share, beating the Zacks Consensus Estimate of $1.31 per share and 8.8% above the year-ago earnings of $1.25 per share.

Despite the negative impact of currency fluctuation and the performance of the Medical Devices & Diagnostics segment, Johnson & Johnson recorded growth on the back of strong product sales as well as the restoration of supply of several over-the-counter (OTC) products.

Johnson & Johnson's third quarter sales increased 3.1% year-over-year to $17.6 billion, above the Zacks Consensus Estimate of $17.4 billion. While operational factors favorably impacted sales by 4.7%, currency fluctuations had a negative impact of 1.6%.

Including one-time items, Johnson & Johnson reported third quarter earnings of $1.04 per share, a penny short of the year-ago earnings of $1.05.

The Quarter in Details

Third quarter sales increased 1.7% in the domestic market. Meanwhile, international sales grew 4.2%, consisting of 7.1% operational growth and 2.9% negative currency impact. Apart from the Medical Devices & Diagnostics segment, the other segments recorded growth during the reported quarter.

The Medical Devices & Diagnostics segment posted sales of $6.9 billion, down 2% year-over year. Sales declined 4.2% sequentially. While operational factors positively impacted Medical Devices & Diagnostics segment sales by 0.3%, foreign exchange movement negatively impacted sales by 2.3%.

Sales in the domestic market declined 4.2% year-over year to $3.2 billion; international market sales slipped 0.1% year over year to $3.8 billion.

Several Medical Devices & Diagnostics markets have been facing challenges in the form of European austerity measures, pricing pressure and a slowdown in elective surgeries, which have all contributed to more tempered growth rates.

Pharmaceutical segment sales increased 9.9% year-over-year to $7 billion (operational growth of 10.9% and negative currency impact of 1%). Sales in the domestic market increased 7.9% to $3.5 billion whereas international sales increased 12% to $3.5 billion.

New products like Zytiga, Invokana, Stelara, Xarelto, Simponi and Invega Sustenna continued to perform well. Other growth drivers included Prezista, Remicade and Velcade. Third quarter Zytiga sales were $464 million, up 75.1% year-over-year. Launch in additional countries and the label expansion for use in chemo-naïve patients should continue driving sales.

The Consumer segment recorded revenues of $3.6 billion in the reported quarter, up 0.8% from the third quarter of 2012. Foreign currency movement negatively impacted sales in the segment by 1.2%. Sales in the domestic market grew 0.9% year-over-year to $1.2 billion, whereas the international market recorded year-over-year growth of 0.8%. OTC sales increased 17.9% in the U.S. with some key products being re-launched. Johnson & Johnson intends to deliver reliable and consistent supply of 75% of the product brands by year end.

Ups Earnings Guidance Again

With Johnson & Johnson's third quarter earnings surpassing expectations, the company raised its 2013 earnings guidance again to $5.44 - $5.49 per share. The company was previously expecting earnings of $5.40 - $5.47 per share. The Zacks Consensus Estimate currently stands at $5.47, towards the higher end of the new guidance range. Shares were up in pre-market trading.

Johnson & Johnson currently carries a Zacks Rank #3 (Hold). Once again, the strong performance of the Pharmaceutical segment helped offset the decline in sales in the Medical Devices & Diagnostics segment. Johnson & Johnson has been trying to offset the declining sales of some of its important products by bringing in new products through in-licensing deals and acquisitions. We believe the diversity and strength of the company's underlying businesses will continue to provide strong growth in future.

While we expect Johnson & Johnson to continue facing headwinds in the form of EU pricing pressure and manufacturing issues, we believe Johnson & Johnson's diversified business model, lack of cyclicality and strong financial position will continue helping the company pave its way through tough situations.

Currently, large-cap pharma stocks like Roche ( RHHBY ), GlaxoSmithKline ( GSK ) and Bayer ( BAYRY ) look well-positioned. While Roche is a Zacks Rank #1 (Strong Buy) stock, Bayer and Glaxo are Zacks Rank #2 (Buy) stocks.



BAYER A G -ADR (BAYRY): Free Stock Analysis Report

GLAXOSMITHKLINE (GSK): Free Stock Analysis Report

JOHNSON & JOHNS (JNJ): Free Stock Analysis Report

ROCHE HLDG LTD (RHHBY): Get Free Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BAYRY , GSK , JNJ , RHHBY

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

2014's Best and Worst Jobs
2014's Best and Worst Jobs          

Stocks

Referenced

100%
79%

Most Active by Volume

132,019,746
  • $16.39 ▲ 2.44%
106,930,017
  • $59.09 ▲ 0.34%
91,643,760
  • $3.09 ▼ 1.12%
79,029,415
  • $85.02 ▲ 0.29%
46,131,885
  • $40.18 ▲ 3.74%
42,395,508
  • $7.06 ▼ 0.56%
40,101,748
  • $26.76 ▲ 0.75%
39,547,363
  • $13.33 ▼ 3.96%
As of 4/15/2014, 04:02 PM