Key takeaways:
Current Price: $170 Price Target: $200 (NEW – from $175)
Position size: 2.43% 1-Year Performance: +12%
- 4Q 2020 results:
- Overall sales +7% organic, adjusted EPS -3.2%. last 12 months FCF ~$20B ($19.9B last year)
- Pharma segment had good results across the board, and market share in Darzalex (multiple myeloma), Stelara (growth in Crohn’s disease application). In immunology, growth remains below pre-covid level though.
- Consumer segment: oral & wound care, skin health & beauty growth were offset by lower over-the-counter sales due to reduction on cold/cough/flu medicine, as well as SKUs rationalization
- Medical Devices: China grew double-digits but US and Europe declined. Hospitals volume decline no more than 10-15% in the most affected areas by covid delays.
- Full year 2020 results overall: +1.5% organic sales. Pharma sales growth helped offset medical devices decline due to delay in doctor’s visits and surgeries. Adjusted EPS -7.8%
- Company has 28 products & platforms with sales above $1B in 2020.
- Vaccine phase 3 update will be provided next week. On track to manufacture 1 billion doses in 2021. More details on pricing and economics of this vaccine will come during the 1Q21 earnings call
- 2021 guidance issued:
- Revenue of $90.5B-$91.7B (+8% to +9.5%), above consensus, and excluding any potential revenue from the vaccine
- Pharma to continue driving overall growth, and cautious optimism on the medtech segment recovery in 2H21
- Operating margin to grow 200bps y/y due to leverage, recovery in medtech procedures and cost improvement initiatives
- EPS $9.40-$9.60 above consensus
- Opioid litigation payout to happen in 2021 vs. 2020 initially
Thesis on JNJ:
- High quality company with consistent 20% ROE, attractive FCF yield,
- Investments in the pipeline and moderating patent expirations create a profile for accelerated revenue and earnings growth
- Growth opportunity: Medical Devices and Consumer offer sustainable growth and potential for expansion internationally
- Strong balance sheet that offers opportunities for M&A.
[category Equity Earnings]
[tag JNJ]
$JNJ.US
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109