Earnings And Revenue Beat Expectations At Johnson & Johnson, And Guidance Is Raised For The Full Year

As Johnson & Johnson cited strong growth across all business units, especially its pharmaceutical arm, its adjusted earnings and revenue exceeded Wall Street's expectations on Tuesday.

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J&J's first-quarter sales grew 5.6% over last year's first quarter, making the company a bellwether for many health companies. 

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Due to its liabilities related to talc baby powder, along with costs related to the spinoff of its consumer health business, the consumer staples giant reported a net loss of $68 million, or 3 cents per share. For the same period last year, the company earned $5.2 billion, or $1.93 per share. In the period under review, adjusted earnings per share were $2.68, excluding certain items.

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Based on a Refinitiv survey of analysts, here's how J&J's results compared with expectations:

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• Adjusted EPS: $2.68, versus $2.50 expected
• $24.75 billion in revenue, compared to the $23.67 billion expected

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The revised earnings forecast for the full year of adjusted earnings is now $10.60 to $10.70 per share, up from the previous forecast of $10.45 to $10.65 per share. The company expects its sales for 2023 to be between $97.9 billion and $98.9 billion, about $1 billion more than originally suggested in January.

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During early trading, shares of the company fell about 2%, putting the value of the company at approximately $430 billion. 

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According to J&J CFO Joseph Wolk, the company raised guidance because of strong growth in all three of its business sectors.

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“If you think about how we started the year and guidance in January, we were responsible and cautious,” he said on “Squawk Box.” We have switched from being responsible and cautious to responsibly optimistic at this point since first-quarter growth was much stronger than even fourth-quarter growth. “We feel very positive about 2023.”

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In addition, J&J feels "very, very good about what lies beyond 2023" based on the data it is producing on its drug for multiple myeloma and its medical device unit.

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J&J reported pharmaceutical sales of $13.4 billion in the same quarter last year, an increase of over 4%. Sales of Darzalex, a biologic for treating multiple myeloma, and Stelara, a blockbuster drug for treating immune-mediated inflammation, contributed to the increase, according to the company.

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As a result of the loss of patent protection for Stelara, Johnson & Johnson plans to continue to grow through the loss, Wolk said during a conference call.

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During the third quarter of 2022, J&J reported nearly $7.5 billion in sales from its medical devices business, an increase of 7.3% over the first quarter of last year. The company attributed the increase to its acquisition of Abiomed, a cardiovascular medical technology company, in December last year.

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About $3.8 billion worth of sales were reported by J&J's consumer health business, which it is spinning off into a separate publicly traded company this year. Over-the-counter products such as Tylenol and skin health products under Neutrogena and Aveeno accounted for the 7.4% growth in that unit over the same period last year.

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Despite Wolk's optimism, J&J hasn't been specific about when the consumer health business will be separated.

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Due to J&J's strong performance in 2022, its board has approved an increase in its quarterly dividend by 5.3%, to $1.19 per share.

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Despite a long-running legal battle over its talc-based baby powder products, the New Brunswick, New Jersey-based company's shares rose going into this earnings season. Earlier this month, J&J offered to settle thousands of lawsuits alleging that its baby powder and other talc products caused cancer for nearly $9 billion over the next 25 years.

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LTL Management, another subsidiary of J&J, filed for Chapter 11 bankruptcy protection earlier this month.

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The reorganization plan will be presented to bankruptcy court in mid-May, according to Wolk. 60,000 claimants have already committed to approving the plan.

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Despite a "vocal minority" of plaintiff attorneys opposing the plan, J&J anticipates winning them over.

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A spokesperson for J&J continued to deny the talc allegations, saying it was "unfortunate" that the company was putting money into what he deemed a “baseless scientific claim."

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Some lawsuits attribute several deaths to J&J's talc products that were contaminated with asbestos, which causes ovarian cancer.

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