Johnson & Johnson
raised its full-year financial guidance as it reported its first results since splitting off its consumer health division.
The brighter outlook accompanied third-quarter earnings that beat Wall Street expectations.
The new full-year guidance raises targets the company laid out in late August. That’s when the separation of
Kenvue
(ticker: KVUE), the consumer unit, was finalized.
“What’s come in since then is better Q3 results than what we had anticipated,”
Johnson & Johnson
(JNJ) CFO Joe Wolk told Barron’s early Tuesday. “We’re balancing that with the opportunity to invest in the fourth quarter, to either accelerate our pipeline or enhance our commercial competitiveness.”
Johnson & Johnson reported third-quarter adjusted earnings of $2.66 a share, better than the $2.52 FactSet analyst consensus estimate. Reported sales were $21.4 billion, up 6.4% from the same period a year earlier, and better than the FactSet consensus estimate of $21 billion.
The company raised its full-year guidance for 2023 adjusted diluted earnings to between $10.07 and $10.13 per share, from its previous expectation of between $10 and $10.10. It now expects reported sales this year of of $83.6 billion to $84 billion, slightly higher than previous guidance of $83.2 billion to $84 billion.
Johnson & Johnson shares were up 1.2% in premarket trading. The stock was down more than 10% this year as of the close of the market Monday. The
S&P 500
has gained about 13% over the same period, and the
NYSE Arca Pharmaceutical Index
(DRG) is up 5.3% this year.
The company continues to struggle with litigation over its talc products. Over the summer, a bankruptcy judge rejected the company’s second attempt at putting the subsidiary that holds its talc liabilities into bankruptcy. Wolk said the company is appealing the ruling.
For the company’s medical devices unit, which it now calls MedTech, sales were $7.5 billion for the quarter, up 10.4% on an operational basis. Medical device stocks have been hammered in recent months amid worries that the new weight loss drugs from
Eli Lilly
(LLY) and
Novo Nordisk
(NVO) could chip away at the market for certain procedures, but Wolk argued that other operations could see higher volumes.
“There’s a number of procedures that people who are obese today are not candidates for,” like knee and hip replacements, among other procedures, Wolk said, and the new obesity drugs might make more people eligible. “It remains to be seen, it’s early days.”
Investor concern over the impending expiration of Johnson & Johnson’s patent protections for its medicine Stelara, which treats plaque psoriasis and other conditions, have set off worries about the long-term growth prospects of the company’s pharmaceuticals segment, which it now refers to as “innovative medicine.”
Sales for the innovative medicine segment were up 4.3% on an operational basis for the quarter compared to the same quarter last year, excluding the impact of foreign exchange, to $13.9 million.
Wolk said that he thinks that Wall Street is feeling more optimistic about the innovative medicines business. “In January of this year, the gap between what analysts had in their models and what we were calling for 2025 was billions off,” Wolk said. “They were very concerned about the Stelara loss of exclusivity. Right now, we’re talking within the range of hundreds of millions. Almost rounding.”
On the earnings call this morning, investors will also be listening for updates on the talc litigation, and the GLP-1 obesity drugs.
Kenvue
went public in May. At the time, Johnson & Johnson owned nearly 90% of the company. In August, Johnson & Johnson closed an exchange offer that distributed its Kenvue holdings to Johnson & Johnson shareholders in return for more than 190 million shares of Johnson & Johnson common stock.
The company has scheduled an earnings call for 8:30 a.m. Eastern Tuesday.
Write to Josh Nathan-Kazis at [email protected]
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