How Did Johnson & Johnson Fare In Q1?

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Johnson & Johnson (NYSE:JNJ) recently reported its Q1 earnings, which were slightly above our estimates. This note details the company’s performance in Q1, and Trefis’ forecasts for the full year 2019. You can view our interactive dashboard analysis ~ How Did Johnson & Johnson Fare In Q1, And What Can We Expect From Full Year 2019? ~ for more details on the key drivers of the company. In addition, you can see more of our data for Healthcare companies here.

How Did Johnson & Johnson Fare In Q1

  • Johnson & Johnson’s total revenues were flat (y-o-y) at $20 billion.
  • Adjusted earnings came in at $2.10 per share, reflecting 2% growth over the prior year quarter.

What Are The Key Revenue Sources For J&J?

  • Johnson & Johnson generates its revenues primarily from three sources ~ pharmaceuticals, medical devices, and consumer healthcare.
  • Pharmaceuticals is the largest segment for the company with annual sales of around $40 billion.
  • It includes sales of drugs for various therapeutic areas, including immunology, neuroscience, oncology, anti-infectives, cardiovascular & metabolism, and pulmonary hypertension.
  • Medical Devices refers to sales of devices for orthopedic, surgery, cardiovascular, and vision care.
  • The company recently divested its diabetes care medical devices business.

What To Expect From the Pharmaceuticals Segment In 2019?

  • Pharmaceuticals segment revenues grew 4% to $10.2 billion in Q1.
  • This can be attributed to higher sales of its oncology drugs ~ Darzalex and Imbruvica.
  • The generic competition for Remicade and Zytiga weighed on the overall segment performance.
  • We forecast a 3% decline for the segment revenues in 2019, primarily due to the generic competition for some of its key drugs, which have lost marketing exclusivity.
  • Remicade and Zytiga combined sales was $8.5 billion in 2018.
  • The company has taken price cuts to maintain Remicade’s leadership position in the infliximab market.
  • However, the generic competition will likely have a meaningful impact on the drug sales in the coming quarters.
  • Imbruvica and Darzalex are seeing growth across multiple indications, and this trend will likely continue for the rest of the year as well.
  • The company recently received the U.S. FDA approval for BALVERSA, which is used for the treatment of advanced metastatic urothelial cancer.
  • This should aid the overall future segment sales.

How Much Can Medical Devices Revenue Grow In 2019?

  • Medical Devices revenue declined 5%, primarily reflecting the impact of Diabetes business divesture.
  • Within Medical Devices, Interventional Solutions, which includes cardiovascular and neurovascular devices, saw revenue growth in low teens in Q1.
  • This can be attributed to strong growth in electrophysiology.
  • This trend will likely continue in the near term.
  • However, the 2019 full year figure will be flat (y-o-y), given the comparison with the prior year, which also included the Diabetes portfolio.

What To Expect From Consumer Healthcare?

  • Consumer Healthcare revenues declined 2% in Q1, primarily due to continued weakness in Baby Care.
  • The weakness in Baby Care can be attributed to relaunch of the company’s product lines in new markets.
  • We forecast the segment revenues to grow in low single-digits in 2019.
  • This will likely be led by Beauty as well as Baby Care, which should do well post relaunch.
  • Beauty sales should trend higher led by Neutrogena, and the impact of Dr.Ci:Labo acquisition.

 

What Will The Impact of the Above On The Company’s Earnings?

  • We forecast the adjusted earnings to be $8.60 per share in 2019.
  • This is derived using an adjusted net income margin of 28.6%, reflecting 120 bps growth over 2018.
  • The company expects its gross margins to improve slightly this year, led by better product mix.

 

 

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