Johnson & Johnson Beats on Q2 Earnings, Ups View Again - Analyst Blog

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Johnson & Johnson ( JNJ ), the first among the large health care companies to report second quarter results, beat expectations yet again. The company's second-quarter 2014 earnings (excluding special items) were $1.66 per share, well above the Zacks Consensus Estimate of $1.54 per share and 12.2% above the year-ago earnings of $1.48 per share.

Johnson & Johnson recorded growth on the back of strong pharma product sales with newly launched products like Olysio performing well.

Johnson & Johnson's second quarter sales jumped 9.1% year-over-year to $19.5 billion, beating the Zacks Consensus Estimate of $18.9 billion. While operational factors favorably impacted sales by 9.4%, currency fluctuations had a negative impact of 0.3%.

Including one-time items, Johnson & Johnson reported second quarter earnings of $1.51 per share, well above the year-ago earnings of $1.33 per share.

The Quarter in Details

Second quarter sales increased 14.9% in the domestic market. Meanwhile, international sales grew 4.4%, consisting of 5.0% operational growth and 0.6% negative currency impact. All the main business segments recorded growth during the quarter with the Pharmaceutical segment recording impressive growth of 21.1%.

The Medical Devices & Diagnostics segment posted sales of $7.2 billion, up 0.7% from the year-ago period. While operational factors positively impacted Medical Devices & Diagnostics segment sales by 0.9%, this was offset by negative currency movement of 0.2%.

Sales in the domestic market declined 1.4% year-over year to $3.2 billion; international market sales grew 2.3% year-over-year to $4.0 billion.

Several Medical Devices & Diagnostics markets have been facing challenges in the form of austerity measures, pricing pressure and a slowdown in elective surgeries, which have all contributed to more tempered growth rates. Price declines related to the implementation of Medicare competitive bidding in mail order and retail negatively impacted the performance of the U.S. Diabetes Care business.

Pharmaceutical segment sales increased 21.1% year-over-year to $8.5 billion (operational growth of 21.1%). Sales in the domestic market increased 36.6% to $4.6 billion, whereas international sales increased 6.8% to $3.9 billion.

New products like Zytiga, Invokana, Stelara, Xarelto and Invega Sustenna continued to perform well. More recent entrants like Olysio and Imbruvica also contributed to growth. Other growth drivers included Remicade, Simponi and Prezista. Second quarter Zytiga sales were $562 million, up 42.3% year-over-year. Launch in additional countries and label expansion for use in chemo-naïve patients should continue driving sales. Newly launched hepatitis C treatment, Olysio, put in an impressive performance with sales coming in at $831 million.

Meanwhile, sales were hampered to a certain extent by generic competition for products like Aciphex and Concerta.

The Consumer segment recorded revenues of $3.7 billion in the reported quarter, up 2.4% from the second quarter of 2013. Foreign currency movement negatively impacted sales in the segment by 1.2%. Sales in the domestic market declined 0.5% year-over-year to $1.3 billion, reflecting the Oct 2013 divestment of the sanitary protection business.

Meanwhile, the international segment recorded sales growth of 3.9% with currency having a negative impact of 1.9%. OTC sales increased 9.0% in the U.S. with some key products being re-launched. Johnson & Johnson has been working on ensuring reliable and consistent supply of products.

Ups Earnings Guidance Again

Following the release of better-than-expected second quarter results, Johnson & Johnson upped its 2014 earnings guidance again. The company now expects earnings in the range of $5.85 - $5.92 per share, up from the previous guidance of $5.80 - $5.90 per share (provided with first quarter results). The Zacks Consensus Estimate for 2014 is currently $5.90 per share, within the guidance range.

Our Take

Johnson & Johnson's second quarter results were strong with the company raising its guidance again. 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. The diversity and strength of the company's underlying businesses should continue to support strong growth in future.

Johnson & Johnson is a Zacks Rank #3 (Hold) stock. Companies that currently look attractive in the healthcare space include AbbVie ( ABBV ), Pfizer ( PFE ) and Allergan ( AGN ). All are Zacks Rank #2 (Buy) stocks.


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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: JNJ , PFE , AGN , ABBV

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