Another Earnings Beat from J&J, View Up - Analyst Blog
Johnson & Johnson ( JNJ ), the first among the large health care companies to report first quarter results, beat expectations yet again. The company's first-quarter 2014 earnings (excluding special items) were $1.54 per share, well above the Zacks Consensus Estimate of $1.48 per share and 6.9% above the year-ago earnings of $1.44 per share.
Despite the negative impact of currency fluctuation, Johnson & Johnson recorded growth on the back of strong pharma product sales.
Johnson & Johnson's first quarter sales increased 3.5% year-over-year to $18.1 billion, just above the Zacks Consensus Estimate of $17.9 billion. While operational factors favorably impacted sales by 5.3%, currency fluctuations had a negative impact of 1.8%.
Including one-time items, Johnson & Johnson reported first quarter earnings of $1.64 per share, well above the year-ago earnings of $1.22.
The Quarter in Details
First quarter sales increased 2.2% in the domestic market. Meanwhile, international sales grew 4.5%, consisting of 7.9% operational growth and 3.4% negative currency impact. Only the Pharmaceutical segment recorded growth in the reported quarter with the Medical Devices & Diagnostics segment remaining flat and the Consumer segment declining.
The Medical Devices & Diagnostics segment posted sales of $7.1 billion, unchanged from the year-ago period. Sales, however, declined 2.7% sequentially. While operational factors positively impacted Medical Devices & Diagnostics segment sales by 1.8%, this was offset by negative currency movement.
Sales in the domestic market declined 1.6% year-over year to $3.2 billion; international market sales grew 1.3% year-over-year to $3.9 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.
Pharmaceutical segment sales increased 10.8% year-over-year to $7.5 billion (operational growth of 12.2% and negative currency impact of 1.4%). Sales in the domestic market increased 7.7% to $3.7 billion, whereas international sales increased 14.0% to $3.8 billion.
New products like Zytiga, Invokana, Stelara, Xarelto and Invega Sustenna continued to perform well. Other growth drivers included Prezista, and Velcade. First quarter Zytiga sales were $512 million, up 48.8% year-over-year. Launch in additional countries and the label expansion for use in chemo-naïve patients should continue driving sales.
Meanwhile, sales were hampered to a certain extent by generic competition for products like Aciphex and Concerta.
The Consumer segment recorded revenues of $3.6 billion in the reported quarter, down 3.2% from the first quarter of 2013. Foreign currency movement negatively impacted sales in the segment by 2.6%. Sales in the domestic market declined 2.9% year-over-year to $1.3 billion, reflecting the Oct 2013 divestment of the sanitary protection business.
Meanwhile, the international segment recorded a 3.4% decline in sales with currency having a negative impact of 4.1%. OTC sales increased 3.4% 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
Following the release of better-than-expected first quarter results, Johnson & Johnson upped its 2014 earnings guidance range by 5 cents to $5.80 - $5.90 per share. The Zacks Consensus Estimate for 2014 is currently $5.83 per share, within the guidance range.
Johnson & Johnson's first quarter results were strong with the company raising its guidance for the year. 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 Amgen ( AMGN ), Regeneron Pharmaceuticals, Inc. ( REGN ) and Allergan ( AGN ). While Amgen and Regeneron are Zacks Rank #1 (Strong Buy) stocks, Allergan is a Zacks Rank #2 (Buy) stock.
ALLERGAN INC (AGN): Free Stock Analysis Report
AMGEN INC (AMGN): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
REGENERON PHARM (REGN): Free Stock Analysis Report
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