Key Takeaways From Johnson & Johnson's 2nd-Quarter Earnings

The company's baby products suffered a setback with declining domestic and worldwide sales

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Jul 18, 2018
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Johnson & Johnson (JNJ, Financial) released its second-quarter earnings on Tuesday. Led by a strong performance in its pharmaceutical business, the company posted robust quarterly earnings and revenue, but narrowed its full-year forecast.

Revenue, earnings and other key metrics

The conglomerate posted adjusted earnings per share of $2.10, an increase of 14.8% from the year-ago quarter. The company’s net income was $4 billion, or $1.45 per share.

The company’s sales for the second quarter came in at $20.83 billion, which grew 10.6% on a year-over-year basis. In addition, organic sales grew 6.3% as a result of strong growth in the pharmaceutical as well as the medical device segment.

Segment details

In the pharmaceutical segment, sales grew 19.9% to $10.35 billion. This segment has immensely contributed to the company’s success. While the segment posted $5.9 billion in revenue in its domestic market, its revenue in the international segment amounted to $4.46 billion.

In the medical devices segment, the company generated sales of $6.97 billion, reflecting 3.7% sales growth.

In the consumer segment, sales were $3.5 billion. While sales fell 0.4% on an operational basis, a favorable change in the foreign exchange rate offset the loss.Â

Baby care line struggles

The company registered a decline in its baby care business. While global sales fell 7.7%, sales in the U.S. plummeted 21%.

In addition, 22 women filed a lawsuit against the company, saying its talc-based products, including baby powder, contained asbestos, which led to them developing cancer. A Missouri jury has ordered the company to pay $4.69 million to the women as compensation. Johnson & Johnson plans to fight the verdict.

In a statement, CEO Alex Gorsky commented on the ruling:

"As you know, our baby powder is a trusted product that we sold to families for over 100 years and Johnson & Johnson is deeply disappointed in this verdict. Now, we remain confident that our products do not contain asbestos and do not cause the varying cancer and we intend to pursue all available appellate remedies."

In addition, the company announced it will introduce its refurbished baby care line next month.

Outlook

Johnson & Johnson anticipates 2018 adjusted earnings per share between $8.07 and $8.17, which also includes the company’s operational growth in the range of 4.5% to 5.5%. Furthermore, revenues are projected to be between $80.5 billion and $81.3 billion.Â

"When you look at the forecast, our operational performance continues to do extremely well," Gorsky said. "So we actually took that portion of our guidance up, and what you see on a reported basis is the impact of negative currency, or better said, less favorable currency than what we had been seeing as the dollar has strengthened here."

Disclosure: I do not hold any positions in the stocks mentioned in this article.