J&J Beats on Q3 Earnings, Raises Sales View but Cuts EPS Guidance

Johnson & Johnson’s JNJ third-quarter 2024 earnings came in at $2.42 per share, which beat the Zacks Consensus Estimate of $2.22. Earnings declined 9% from the year-ago period.

Adjusted earnings exclude a one-time special charge, including which, reported earnings were $1.11 per share, down 34.3% year over year.

Sales of this drug and medical devices giant came in at $22.47 billion, which beat the Zacks Consensus Estimate of $22.19 billion. Sales rose 5.2% from the year-ago quarter, reflecting an operational increase of 6.3% and a negative currency impact of 1.1%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 5.4% on an operational basis.

Third-quarter sales in the domestic market rose 7.6% to $12.9 billion. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, domestic sales rose 6.5% in the quarter.

International sales rose 2.2% on a reported basis to $9.56 billion, reflecting an operational increase of 4.6% and a negative currency impact of 2.4%. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, international sales rose 4.0% in the quarter.

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J&J’s Innovative Medicines Unit Outperforms, MedTech Misses

With last year’s complete separation of the Consumer Health segment into a newly listed company called Kenvue KVUE, J&J has now become a two-sector company focused on the Pharmaceutical and MedTech fields.

Sales in J&J’s Innovative Medicines segment (previously the Pharmaceutical segment) rose 4.9% year over year to $14.58 billion, reflecting a 6.3% operational increase and a 1.4% negative currency impact. Excluding the impact of all acquisitions and divestitures and currency on an adjusted operational basis, worldwide sales rose 6.4%. Innovative Medicines sales beat the Zacks Consensus Estimate of $14.15 billion as well as our model estimate of $13.97 billion.

Higher sales of key products such as Darzalex, Tremfya, Uptravi, Opsumit, and Erleada drove the segment’s growth. New drugs like Carvykti, Tecvayli and Spravato also contributed to growth. The sales growth was partially dampened by lower sales of Stelara, Simponi/Simponi Aria and Imbruvica and generic/biosimilar competition to drugs like Zytiga and Remicade.

Sales of blockbuster multiple myeloma medicine Darzalex rose 20.7% year over year to $3.02 billion in the quarter. Sales beat the Zacks Consensus Estimate of $2.96 billion and our model estimate of $2.94 billion.

Sales of the blockbuster psoriasis drug Stelara declined 6.6% to $2.68 billion in the quarter. Several biosimilar versions of Stelara are expected to be launched in the United States in 2025. A biosimilar version of Stelara was launched in certain European markets for certain indications in July 2024. While U.S. sales of Stelara declined 7.5%, international sales declined 4.8% in the quarter. However, Stelara sales beat the Zacks Consensus Estimate as well as our model estimate of $2.53 billion.

Imbruvica sales declined 6.8% to $753.0 million. Rising competitive pressure in the United States due to new oral competition has been hurting sales of Imbruvica for the past few quarters. Imbruvica sales were, however, better than the Zacks Consensus Estimate of $730.0 million and our estimate of $722.9 million.

Erleada generated sales of $790.0 million in the quarter, up 25.4% year over year. Erleada sales beat the Zacks Consensus Estimate of $778.0 million as well as our model estimate of $755.2 million. Tremfya recorded sales of $1.0 billion in the quarter, up 13.0% year over year. Tremfya sales slightly missed the Zacks Consensus Estimate as well as our model estimate of $1.06 billion.

New drug Carvykti recorded sales of $286 million, up 87.7% year over year. Another new drug, Tecvayli, recorded sales of $135 million in the quarter, up 20.6% year over year,

Spravato recorded sales of $284.0 million, up 54.9% year over year.

Pulmonary arterial hypertension (PAH) drug Uptravi recorded sales of $458.0 million, up 14.2% year over year. Another PAH drug, Opsumit, recorded sales of $571 million, up 16.8% year over year.

Xarelto sales declined 5.2% in the quarter to $592 million. Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales rose 1.9% to $1.05 billion in the quarter. Simponi/Simponi Aria sales declined 18% to $516.0 million, while Prezista sales rose 0.6% to $449.0 million. 

Zytiga sales declined 30.0% to $150.0 million in the quarter due to generic competition. Sales of Remicade were down 9.1% in the quarter to $419 million.

MedTech segment sales came in at $7.89 billion, up 5.8% from the year-ago period, as an operational increase of 6.4% was offset by a negative currency movement of 0.6%. MedTech segment sales missed the Zacks Consensus Estimate of $8.07 billion as well as our model estimate of $8.15 billion.

Excluding the impact of all acquisitions and divestitures, and currency, on an adjusted operational basis, worldwide sales rose 3.7%.

JNJ Ups 2024 Sales Outlook, Cuts EPS View

J&J raised its total revenue expectation for the year as it expects an improved performance in the rest of the year. However, the company lowered its adjusted earnings expectation as its expectation of a better operational performance was partially offset by costs associated with the recent acquisition of private medical device company V-Wave.

Total revenues are expected in the range of $88.4 billion-$88.8 billion for 2024, up from $88.0 billion-$88.4 billion expected previously. The sales range indicates growth in the range of 5.1% – 5.6% versus 4.7%-5.2% previously. Operational sales growth is expected in the range of 6.3% – 6.8% compared with 6.1%-6.6% previously.

The adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth guidance was raised from a range of 5.5%-6% to 5.7%-6.2% previously.

The revenue figures exclude revenues from COVID-19 vaccine sales.

The adjusted earnings per share guidance was lowered from a range of $9.97-$10.07 to $9.88-$9.98 per share. The earnings range implies growth in the range of -0.4% to 0.6% (0.5%-1.5% expected previously).

Our Take on JNJ’s Q3 Results

J&J beat third-quarter estimates for both earnings and sales. Its Innovative Medicines unit outperformed expectations, with sales of several key drugs like Darzalex and Erleada beating estimates. Though sales of key drugs Stelara and Imbruvica declined in the quarter, they also beat estimates. However, Tremfya's sales slightly missed expectations. MedTech unit’s sales also missed estimates.

J&J’s shares were down more than 1% in pre-market trading on Tuesday, as the company, for the second time this year, lowered its earnings expectations due to charges related to recent acquisitions

So far this year, J&J’s shares have risen 3.1% compared with the industry’s 21.3% increase.

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J&J’s Innovative Medicines unit is performing at above-market levels. Its growth is being driven by key products like Darzalex, Stelara, Tremfya, Erleada and Uptravi and also continued uptake from new launches, including Spravato, Carvykti and Tecvayli. While strong global procedure growth, new product uptake and commercial execution are driving growth in the MedTech segment, headwinds in Asia-Pacific markets like China and competitive pressure in some categories are hurting growth. The company is also incurring huge legal expenses due to its pending lawsuits, which allege personal injuries to patients caused by the use of its talc products. The launch of Stelara generics could significantly erode the drug’s sales in 2025 and hurt the company’s top line.

J&J's Zacks Rank and Stocks to Consider

J&J currently has a Zacks Rank #3 (Hold).

Some better-ranked large drugmakers are Eli Lilly LLY and AstraZeneca AZN, carrying a Zacks Rank #2 (Buy) each.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Estimates for Lilly’s 2024 earnings have risen from $13.71 to $15.66 per share over the past 90 days. For 2025, earnings estimates have risen from $19.42 to $24.16 per share over the same timeframe. Year to date, Lilly’s stock has risen 59.4%.

Lilly beat estimates in each of the last four quarters, delivering a four-quarter average earnings surprise of 69.07%.

The Zacks Consensus Estimate for AstraZeneca’s earnings has risen from $4.04 to $4.07 per share for 2024 over the past 90 days, while that for 2025 has risen from $4.69 per share to $4.71 per share. AstraZeneca’s shares have risen 15.9% year to date.

AstraZeneca beat estimates in three of the last four quarters while missing in one, delivering a four-quarter average earnings surprise of 4.74%.

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