Analysts Assess Johnson & Johnson’s Report as Moderately Positive

Johnson & Johnson (JNJ) reported for the third quarter better than investors’ expectations on EPS, but worse on revenue. Adjusted earnings per share were $2.6, beating the consensus by 10.6%. Pharmaceuticals look strong, while medical devices and consumer products posted lower revenues compared to the second quarter.

J&J’s revenue rose 10.7% YoY and 0.1% QoQ to $ 23.3bn, 1.3% below consensus.

Sales in the consumer goods segment increased by 5.3% YoY, mainly due to OTC drugs, and decreased by 0.9% compared to the second quarter. The main contribution to the improvement of the indicator was made by the sale of drugs TYLENOL and MOTRIN, analgesics, drugs for diseases of the upper respiratory tract and the digestive system, as well as the dermatological product AVEENO.

The largest pharmaceutical segment became the leader in terms of revenue growth, which here increased 13.8% YoY and 3.1% QoQ thanks to sales of DARZALEX for the treatment of myeloma, STELARA against immune-mediated inflammatory diseases, TREMFYA for psoriasis and psoriatic arthritis, and ERLEADA, used in the treatment of prostate cancer. Positive dynamics was recorded in the sales of INVEGA SUSTENNA / XEPLION / INVEGA TRINZA / TREVICTA drugs for the treatment of schizophrenia and OPSUMIT for the treatment of pulmonary arterial hypertension. Sales of the non-commercial COVID-19 vaccine (Ad26.COV2.S) also contributed to the revenue growth. In the United States, sales of REMICADE, a drug for the treatment of a number of immune-mediated inflammatory diseases and an anti-diabetes drug INVOKANA, were recorded.

Revenues in the medical device segment increased by 8% YoY, but decreased compared to the April-July result. Sales growth was shown by electrophysiological devices in the segment of interventional solutions, as well as surgical and orthopedic directions. Medical equipment for the treatment of diseases of the spine and sports devices showed a decline in sales.

J&J’s management has raised its financial outlook for the current year. Core business revenue excluding COVID-19 vaccine sales is expected to be in the range of $91.6-92.1 billion (previous estimate: $91.3-92.1 billion), EPS non-GAAP should be in the range of $9.77-9. 82 (Previous estimate: $ 9.60-9.70).

We estimate the Johnson & Johnson report as moderately positive, keeping the target price at $182 with a Buy recommendation and a market performance rating.