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