J&J (JNJ) Q1 Earnings Top, COVID-19 Vaccine Brings $100M Sales

Johnson & Johnson

’s

JNJ

first-quarter 2021 earnings came in at $2.59 per share, which beat the Zacks Consensus Estimate of $2.31. Earnings increased 12.6% from the year-ago period.

Adjusted earnings exclude intangible amortization and some other special items. Including these items, J&J reported first-quarter earnings of $2.32 per share, up 6.9% from the year-ago quarter.

Sales of this drug and consumer products giant came in at $22.3 billion, which beat the Zacks Consensus Estimate of $21.82 billion. Sales rose 7.9% from the year-ago quarter, reflecting an operational increase of 5.5% and a positive currency impact of 2.4%.

Organically, excluding the impact of acquisitions and divestitures, sales rose 6% on an operational basis compared with 7.9% increase seen in the previous quarter.

First-quarter sales in the domestic market rose 3.9% to $11.1 billion. International sales rose 12.2% on a reported basis to $11.21 billion, reflecting an operational increase of 7.3% and a currency impact of 4.9%. Excluding the impact of all acquisitions and divestitures, on an adjusted operational basis, international sales rose 8.2% in the quarter.

Segment Details

Pharmaceutical segment sales rose 9.6% year over year to $12.2 billion, reflecting 7.1% operational growth and 2.5% positive currency impact. Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales increased 7.4%, lower than 14.6% increase in the previous quarter.

The sales increase was led by higher penetration and new indications across key products, such as Darzalex, Imbruvica and Stelara. Other core products like Invega Sustenna, J&J’s pulmonary arterial hypertension (PAH) drugs and new drugs, Erleada and Tremfya contributed significantly to sales growth.

Moreover, improvement in sales of some other key drugs like Xarelto seen in the past few quarters continued into the first quarter of 2021. The sales growth was hurt by generic/biosimilar competition to drugs like Zytiga and Remicade.

Darzalex sales rose 45.6% year over year to $1.37 billion in the quarter. Stelara sales grew 18.1% to $2.15 billion in the quarter. Imbruvica sales rose 9% to $1.13 billion. J&J markets Imbruvica in partnership with

AbbVie


ABBV

.

PAH revenues of $861 million rose 15.5% year over year, driven by strong sales growth for Uptravi and Opsumit. Invega Sustenna sales rose 9.4% to $965 million in the quarter. Simponi/Simponi Aria sales grew 6.2% to $562 million while Prezista sales decreased 5.8% to $546 million.

Xarelto sales rose 11.7% in the quarter to $589.0 million, while sales of Invokana/Invokamet declined 14.4% to $150.0 million.

Among the newer medicines, Erleada generated sales of $261 million in the quarter compared with $241 million in the previous quarter. Tremfya recorded sales of $418 million in the quarter, up 41% year over year.

Zytiga sales declined 7.6% to $638 million in the quarter due to generic competition. Sales of Procrit/Eprex declined 18.2% to $127 million in the quarter due to biosimilar competition. Sales of Remicade were down 21.5% in the quarter to $777 million. J&J markets Remicade in partnership with

Merck


MRK

.

J&J’s single-dose COVID-19 vaccine, which was granted emergency approval by the FDA in February, generated sales of $100 million in the first quarter.

In March, the European Commission also granted Conditional Marketing Authorization (CMA) to the vaccine. The vaccine is under scrutiny for possible links to very rare cases of blood clots in the brain. On Apr 13, the FDA and U.S. Centers for Disease Control and Prevention (“CDC”)

jointly issued a statement

to recommend a temporary pause in the use of J&J’s vaccine in the United States as they review six reports of “rare and severe” blood clots in a few individuals who had taken the J&J one-shot COVID-19 vaccine. Following the statement, J&J decided to delay the rollout of the vaccine in Europe.

Medical Devices segment sales came in at $6.58 billion, up 10.9% from the year-ago period, reflecting an operational increase of 8% and a positive currency movement of 2.9%.

Excluding the impact of all acquisitions and divestitures, on an operational basis, worldwide sales rose 8.8% against a decline of 1.5% in the previous quarter.

The pandemic hit this segment the hardest due to a widespread decline in elective surgical procedures. However, the segment benefited from better-than-expected market recovery in the second half of 2020 amid faster-than-expected ramping up of medical procedures. The recovery continued in the first quarter of 2021.

The Consumer segment recorded revenues of $3.54 billion in the reported quarter, down 2.3% year over year, reflecting 3.3% operational decrease but 1% positive currency impact.

Excluding the impact of acquisitions and divestitures, adjusted operational sales decrease was 2.9% worldwide compared with a 2.1% increase seen in the previous quarter. Sales in the first quarter were hurt by negative COVID-19 related sales comparisons from the prior-year quarter primary in the OTC products category. However, Listerine in oral care products, Johnson’s Baby in baby care products and international skin health/beauty products did well in the quarter.

2021 Outlook

J&J tightened its previously issued guidance range for earnings and sales for 2021. It tightened its revenue guidance from a range of $90.5 billion to $91.7 billion to $90.6 billion to $91.6 billion. The new range indicates a year-over-year increase of 9.7%-10.9% compared with 9.5%-11% expected previously. The Zacks Consensus Estimate for total revenues stands at $91.25 billion.

Operational constant-currency sales are expected to increase in the range of 8.2%-9.4% compared with 7.5%-9% previously. Adjusted operational sale (excluding currency impact, acquisitions/divestitures) are expected to be up 8.7%-9.9% versus 8%-9.5%.

Adjusted earnings per share are expected in the range of $9.42-$9.57 versus $9.40-$9.60 previously. The new range indicates an increase in the range of 17.3%-19.2%. The Zacks Consensus Estimate stands at $9.48 per share. On an operational, constant-currency basis, adjusted earnings per share are expected to increase 15.8%-17.7% (previously 15.2% – 17.7%).

Our Take

J&J beat first-quarter estimates for earnings as well as sales. Its Pharmaceuticals unit continued to perform above market levels. The recovery in the Medical Devices unit continued as well. However, pandemic-related consumer stocking, which significantly benefited the Consumer segment in the first quarter of 2020, was missing in the first quarter of 2021, which hurt sales of the segment.

While the company reported $100 million in sales for its COVID-19 vaccine, the temporary pause on its use is a matter of concern.

Meanwhile, J&J tightened its forecast for the year, which probably led shares to decline slightly in pre-market trading. This year so far, J&J’s shares have risen 3.3% compared with the

industry

’s 1.7% growth.

J&J announced a 5% increase in its quarterly dividend from $1.01 per share to $1.06 per share.

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

the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

.

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