Johnson & Johnson (JNJ) Q1 2024 Earnings

Johnson & Johnson on Tuesday reported First-quarter adjusted earnings beat Wall Street expectations as sales were consistent with their first quarter Medical equipment business increased.

Meanwhile, the corporate’s total revenue in the course of the period was largely consistent with estimates.

J&J’s medtech division offers surgical, orthopedic and vision devices. The company is benefiting from a recovery in demand for non-urgent surgeries amongst older adults, who’ve postponed these procedures in the course of the Covid pandemic. This increased demand has been observed by health insurers Humana, United Health Group and Elevance Health.

J&J CFO Joseph Wolk told CNBC’s “Squawk Box” on Tuesday that buyers could also be pulling back in other areas but “don’t want to compromise when it comes to their health, their mobility and their ability to “To live a fulfilled life.” He added that the company has seen increased levels of intervention following the pandemic and “we’ve not seen a pullback from that.”

Still, the company’s shares closed more than 2% lower on Tuesday.

Here’s what J&J reported for First quarter compared to Wall Street expectations based on an analyst survey by LSEG:

• Earnings per share: $2.71 adjusted vs. $2.64 expected
• Revenue: $21.38 billion versus expected $21.4 billion

J&J’s financial results are considered benchmarks for the entire healthcare sector.

The company reported total revenue of $21.38 billion in the first three months of 2024, an increase of more than 2% compared to the same quarter of 2023.

The pharmaceutical giant reported net income of $5.35 billion, or $2.20 per share, for the quarter. That compares with a net loss of $491 million, or 19 cents per share, in the year-ago period. At that time, J&J recorded costs related to its talc baby powder liabilities and the spinoff of its consumer health division Kenvue.

Excluding certain items for the first quarter of 2024, adjusted earnings per share were $2.71.

J&J also cut its full-year guidance. The company now expects sales of $88 billion to $88.4 billion. That compares with a previous forecast of $87.8 billion to $88.6 billion.

J&J expects adjusted earnings of $10.57 to $10.72 per share. This compares to a previous forecast of $10.55 to $10.75 per share.

Separately, J&J said Tuesday that it will increase its quarterly dividend is $1.24 per share, up 4.2% from $1.19 per share. This is the 62nd consecutive year of dividend increases for the company, it said. The dividend is payable on June 4th.

The results come weeks after J&J’s whopping $13.1 billion acquisition of the cardiac device maker Shockwave Medical – part of its push into the cardiovascular space. Both companies said the deal will make J&J the market leader in four fast-growing cardiovascular technology categories.

J&J expects the transaction to close midyear, which will impact the company’s full-year guidance, executives said during an earnings call on Tuesday.

J&J has acquired two other cardiac device companies in the past two years, spending $16.6 billion to buy Abiomed and $400 million to acquire privately held Laminar.

These deals are also aimed at strengthening J&J’s medical device business following the company’s separation from its consumer health division Kenvue last year.

J&J’s medical device business generated first-quarter revenue of $7.82 billion, up more than 4% from a year earlier. According to StreetAccount estimates, Wall Street expected sales of $7.87 billion.

J&J said the Abiomed acquisition fueled the year-over-year increase. Growth was also driven by electrophysiology products that assess the heart’s electrical system and help doctors understand the cause of cardiac arrhythmias, J&J said.

Wound closure products and devices for orthopedic trauma or severe injuries to the skeletal or muscular system also contributed.

But sales of the division’s vision products, including contact lenses, fell 3.3% to $1.26 billion in the quarter. Wall Street expected Vision sales of $1.33 billion.

During the call, J&J executives said this was primarily due to a “decline” in U.S. distributors’ inventory of contact lenses. However, they added that the company expects single-digit growth in vision this year and is confident there will be a “tremendous improvement within the performance of this business” going forward.

Meanwhile, J&J reported pharmaceutical sales of $13.56 billion, up about 1% year over year. Excluding sales of its unpopular Covid vaccine, sales in the pharmaceutical division rose almost 7%.

It was the fourth quarter excluding U.S. sales of J&J’s Covid vaccine, which brought in $25 million in international sales.

According to StreetAccount, analysts expected revenue of $13.5 billion for the business segment. Also known as “Innovative Medicine,” the company focuses on developing drugs for various disease areas.

The company said the growth was driven by sales of Darzalex, a biologic used to treat multiple myeloma, and Erleada, a treatment for prostate cancer. J&J’s Carvykti, a cell therapy approved for a type of blood cancer, and other oncology treatments also contributed to the increase.

But sales of the company’s blockbuster drug Stelara, used to treat several chronic and potentially disabling diseases such as Crohn’s disease, were relatively flat in the first quarter compared to the same period last year.

Stelara had revenue of $2.45 billion in the quarter. Wall Street expected sales of $2.61 billion.

J&J began losing patent protection for Stelara late last year, allowing cheaper biosimilar competitors to enter the market. But the company has signed settlement agreements with Amgen and other drugmakers to delay the launch of some Stelara copycats until 2025.

J&J’s first-quarter results come amid investor concern over tens of thousands of lawsuits alleging that the company’s talc-based products were contaminated with the carcinogen asbestos and caused ovarian cancer and several deaths.

These products, which include J&J’s eponymous baby powder, now fall under Kenvue. However, J&J assumes all talc-related liabilities arising in the United States and Canada.

Notably, a federal judge ruled in March that J&J can challenge scientific evidence linking its talc products to ovarian cancer, potentially disrupting a federal court case consolidating 53,000 lawsuits.

Wolk on Tuesday called that ruling a “very significant development” and said the evidence presented against J&J was “junk science.” However, he noted that it was difficult to provide a timeline for when the company would find a comprehensive resolution to the ongoing litigation.

In January, J&J said it had reached a preliminary agreement solve one Investigation from greater than 40 states in allegations that the corporate misled patients about it Security of its talc-based products. The company can pay $700 million to settle the investigation, Wolk said said the Wall Street Journal by the time.

Last year, J&J provided about $400 million to resolve U.S. states’ consumer protection claims.

Notably, the settlement does not resolve the lawsuits, some of which are scheduled to go to trial later this year.