What To Watch For In Johnson & Johnson’s Q3

by Trefis Team
Johnson & Johnson
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Johnson & Johnson (NYSE:JNJ) is set to report its Q3 2018 earnings on October 16, and we expect the company to post steady growth, led by a ramp up in its oncology drugs sales. J&J’s key oncology drugs – Imbruvica, Darzalex, and Zytiga – have been on a strong run of late, and we expect this trend to continue, and drive the earnings growth for the company. We expect the company’s Consumer Healthcare business to see modest revenue gains, as growth in Beauty products will mostly be offset by continued decline in Baby Care products, similar to the trend seen in the recent past. Similarly, we don’t expect any significant growth in the company’s Medical Devices segment, as Vision Care and Surgery revenue growth will partly be offset by an expected decline in the Diabetes Care products. Note that the company’s Diabetes unit, LifeScan, was sold to Platinum Equity for $2.1 billion, and the transaction was completed earlier this month. We have created an interactive dashboard analysis What Is The Q3 Outlook For Johnson & Johnson. You can adjust the revenue drivers to see the impact on the company’s adjusted  earnings, and price estimate.

Expect Pharmaceuticals To Lead Q3 Earnings Growth Led By Oncology

We expect J&J’s Pharmaceuticals’ revenue to grow in low double digits for the full year 2018, primarily led by a continued ramp up in oncology drugs sales, and also benefiting from Actelion’s acquisition. Within oncology, Imbruvica, Darzalex, and Zytiga have seen solid growth of late, and we expect this trend to continue in near term. Imbruvica reduces previously untreated chronic lymphocytic leukemia patient’s risk of death by a massive 85% in patients aged 65 or above, when compared to traditional chemotherapy. Thus the market for Imbruvica is huge, and the potential peak sales for J&J could be as high as $4 billion. The company recently announced the U.S. FDA approval for Imbruvica in combination use with Roche’s Rituxan for the treatment of Waldenström’s macroglobulinemia, which is a rare form of Non-Hodgkin’s lymphoma. Darzalex is also seeing strong growth in multiple myeloma therapeutic area. Zytiga is seeing growth in the metastatic high-risk castration sensitive prostate cancer indication based on the LATITUDE clinical trials, and it is unlikely to see any generic competition in the near term. As such, we expect these three drugs to see strong revenue growth in Q3 and aid the overall earnings growth for the company. 

Consumer Healthcare And Medical Devices Will Likely See Moderate Growth In Q3

Johnson & Johnson’s Consumer Healthcare business will likely see modest growth in Q3, as an expected decline in Baby Care products will weigh on the overall segment performance. The company is facing competitive pressure for its Baby Care products, and this trend will likely continue in the near term. On the other hand, Beauty is seeing steady growth, led by Neutrogena and Aveeno brands. Looking at the Medical Devices segment, we forecast low single digit revenue growth in 2018, partly led by vision care, due to the Abbott Medical Optics acquisition last year. However, sales at other areas, primarily Diabetes Care, will likely remain weak. While the company has sold its LifeScan unit, it continues to see competitive pressure and price erosion for its Diabetes Care products. Overall, we expect the company to post adjusted earnings of $8.15 in 2018, and we currently have a $154 price estimate, which we will revise post the  Q3 earnings release.


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