J&J’s upbeat guidance brings good news for big pharma

Johnson & Johnson (NYSE: JNJ), on Tuesday, issued encouraging guidance for the full year. Shares are still trading slightly down this morning.  

Why is J&J stock down today?

The stock seems to be responding to its fourth-quarter revenue that came in a bit shy of estimates.

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Nonetheless, in 2023, J&J now expects to earn $10.55 a share – meaningfully ahead of $10.33 a share that analysts had anticipated. On CNBC’s “Squawk Box”, CFO Joseph Wolk said:

We’re being cautious with 2023 guidance given all the macroeconomic and geopolitical uncertainty. We’ve got inflation built in. So, some of the inventory we build in 20222 at higher cost will flow through our P&L in 2023.

J&J’s pharmaceutical sales in Q4

Johnson & Johnson reported $13.2 billion in pharmaceutical sales this quarter primarily on the strength of Darzalex (multiple myeloma treatment) and Stelara (inflammatory disease treatment). The segment sales were roughly in line with estimates because:

There were some austerity measures, some pricing pressures throughout the industry as well as loss of exclusivity on prostate cancer drug Zytiga in Europe that the Street underappreciated how quickly that would erode.

J&J stock is now down 7.0% versus its year-to-date high.

J&J fourth-quarter earnings snapshot

Net income printed at $3.52 billion versus $4.74 billion a year ago
Per-share earnings also went down from $1.77 to $1.33
Adjusted EPS came in at $2.35 as per the earnings press release
Revenue slid 4.4% on a year-over-year basis to $23.71 billion
Consensus was $2.23 of adjusted EPS on $23.89 billion revenue

Other notable figures

Medical devices sales went up 6.1% in Q4 but fell a bit short of Street expectations on the weakness in China. In November, Johnson & Johnson bought ABIOMED Inc for $16.6 billion as Invezz reported here.

Consumer health up 3.9% was slightly better than expected on strong demand for Tylenol and Motrin. CFO Wolk also noted:

I was encouraged that Neutrogena and Aveeno got past some of the supply chain challenges. Very strong performance overall in consumer unit and tremendous progress made to the process of separating that business.