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J&J (JNJ) Beats on Q2 Earnings & Sales, Ups 2020 Guidance

Johnson & Johnson JNJ second-quarter 2020 earnings came in at $1.67 per share, which beat the Zacks Consensus Estimate of $1.50. Earnings however declined 35.3% from the year-ago period.

Adjusted earnings exclude after-tax intangible amortization expense and some special items. Including these items, J&J reported second-quarter earnings of $1.36 per share, down 34.6% from the year-ago quarter.

Sales of the drug and consumer products giant came in at $18.3 billion, which beat the Zacks Consensus Estimate of $17.57 billion. Sales however declined 10.8% from the year-ago quarter, reflecting an operational decrease of 9% and an unfavorable currency impact of 1.8%.

Organically, excluding the impact of acquisitions and divestitures, sales decreased 8.8% on an operational basis in contrast to 5.6% increase seen in the first quarter mainly due to the negative impact of the coronavirus pandemic.

Second-quarter sales in the domestic market declined 8.3% to $9.54 billion. International sales declined 13.4% to $8.8 billion (operational decrease of 9.6%). Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales declined 9.4% in the quarter.

Segment Details

Pharmaceutical segment sales rose 2.1% year over year to $10.75 billion, reflecting 3.9% operational growth, which was offset by 1.8% negative currency impact. Sales in the domestic market rose 5.8% to $6.12 billion. International sales however declined 2.4% to $4.63 billion (operational increase of 1.4%). Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales increased 3.9%, lower than 10.2% increase in the first quarter.

The sales increase was led by the company’s oncology drugs, Imbruvica and Darzalex as well as psoriasis treatment, Stelara, which offset the impact of biosimilar and generic competition on some drugs and the negative impact of COVID-19. Delayed diagnosis and new patient starts due to the COVID-19 pandemic hurt sales of some drugs in the quarter.

Worldwide sales of J&J’s oncology drugs rose 3.5% in the quarter to $2.79 billion. Other core products like Invega Sustenna, J&J’s pulmonary arterial hypertension (PAH) drugs, and new drugs, Tremfya and Erleada contributed significantly to sales growth.

Moreover, sales of some other key drugs like Xarelto and Invokana/Invokamet improved in the quarter after declining in the past few quarters. Sales of others like Zytiga, Remicade, Velcade (internationally) and Procrit/Eprex declined due to the impact of generic/biosimilar competition.

Imbruvica sales rose 14.1% to $941 billion in the quarter. J&J markets Imbruvica in partnership with AbbVie ABBV.

Darzalex sales rose 16.3% year over year to $901 million in the quarter. Stelara sales rose 8.9% to $1.7 billion in the quarter. PAH revenues of $789 million rose 14.2% year over year driven by strong share growth for Uptravi and Opsumit.

Invega Sustenna sales rose 7.5% to $879 million in the quarter. Simponi/Simponi Aria sales declined 3% to $546 million in the quarter. Prezista sales declined 4.78% to $510 million in the quarter. 

Tremfya recorded sales of $342 million in the quarter compared with $296 million in the previous quarter. Erleada generated sales of $170 million in the quarter compared with $143 million in the first quarter.

Zytiga sales declined 18.6% to $568 million in the quarter due to generic competition.

Xarelto sales rose 1.7% in the quarter to $559 million. Sales of Invokana/Invokamet rose 1.6% to $179 million.

Sales of Procrit/Eprex declined 25.6% to $136 million in the quarter due to biosimilar competition. Velcade sales declined 56.1% in the quarter to $98.0 million. Sales of Remicade were down 15.5% in the quarter to $935 million. J&J markets Remicade in partnership with Merck MRK.

Medical Devices segment sales came in at $4.29 billion, down 33.9% from the year-ago period, reflecting an operational decrease of 32.7% and negative currency movement of 1.2%. The pandemic has hit this segment of J&J the hardest due to widespread decline in elective surgical procedures and redeployment of hospital resources to address patients affected by COVID-19. Please note that sales of the Medical Devices unit were higher than the Zacks Consensus Estimate of $3.03 billion.

Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales decreased 32.5%, much steeper than a decrease of 4.8% in the previous quarter. J&J had, back in April, warned that the negative impact seen in the Medical Devices unit would be most significant in the second quarter.

The Consumer segment recorded revenues of $3.3 billion in the reported quarter, down 7% year over year. On an operational basis, Consumer segment sales decreased 3.6%. Unfavorable foreign currency movement hurt sales by 3.4%.

Excluding the impact of acquisitions and divestitures, adjusted operational sales decline was 3.4% worldwide against 11% growth seen in the previous quarter. As expected, the massive coronavirus related stockpiling benefit seen in the Consumer Health segment in the first quarter, mainly related to its over-the-counter (OTC) medicines, reversed somewhat in the second quarter.

Higher sales of OTC products like Tylenol and Zyrtec, oral care product Listerine mouthwash and digestive health products were offset by the negative impact of the COVID-19 pandemic on certain categories like skin care and beauty care products in the second quarter. Sales in the skin care and beauty care categories were hurt as a result of reduced store traffic and social distancing. On the contrary, sales of the OTC and oral care products benefited from consumer stockpiling of these products amid the pandemic.

2020 Guidance Raised

J&J upped its financial guidance for 2020. Adjusted earnings per share expectations were raised from a range of $7.50 - $7.90 to $7.75-$7.95. The guidance range now indicates a decline in the range of 8.4%-10.7% versus the prior expectation of decline of 9%-13.6%. On an operational, constant currency basis, adjusted earnings per share are expected to decline in the range of 7.3%-9.6%. The prior expectation was of a decline in the range of 7.3%-11.9%.

Revenues are now expected in the range of $79.9-$81.4 billion, indicating year-over-year decline of 0.8%-2.6%. Previous expectation for revenues was in the range of $77.5-$80.5 billion, indicating year-over-year decline of 2%-5.5%.

Operational constant currency sales are expected to be up 0.5% to down 1.3% compared with the prior expectation of flat to down 3.5%. Adjusted operational sales, (excluding currency impact, acquisitions/divestitures) are expected to be down 0.8% to up 1% (previous expectation was down 3% to up 0.5%).

Progress in Coronavirus Vaccine Efforts

In June, J&J said that it was accelerating the timeline for initiation of a phase I/II human clinical study on its vaccine candidate for COVID-19 to the second half of July rather than September as announced earlier. The phase I/II study will be conducted in 1045 healthy adults aged 18 to 55 years, plus adults aged 65 years and older and will be initiated in the United States and Belgium. J&J is holding talks with the National Institutes of Allergy and Infectious Diseases to begin pivotal phase III studies on the candidate sooner than planned if data from the phase I/II study is positive.

J&J looks confident of having the first batch of COVID-19 vaccine available for emergency use authorization, on a not-for-profit basis, by early 2021. J&J’s goal is to supply more than 1 billion doses of the vaccine globally if it proves to be safe and effective.

Our Take

J&J beat second-quarter estimates for earnings as well as sales. Its Pharmaceuticals unit continued to do well despite the coronavirus crisis. However, the pandemic hurt sales in its Medical Devices segment across its Surgery, Orthopedics, Interventional Solutions, and Vision businesses.

J&J raised its financial outlook for the year probably due to lower-than-expected decline in sales of the Medical Devices unit. Alex Gorsky, J&J’s chief executive officer, said that the company is committed to provide a COVID-19 vaccine on a not-for-profit basis for emergency pandemic use

Shares were up slightly in pre-market trading. This year so far, J&J’s stock has risen 1.6% against a decrease of 0.1% for the industry.

 

 

J&J currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Johnson Johnson Price, Consensus and EPS Surprise

 

Johnson  Johnson Price, Consensus and EPS Surprise

 

Johnson Johnson price-consensus-eps-surprise-chart | Johnson Johnson Quote

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