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