Key takeaways:
Current Price: $166 Price Target: $200
Position size: 2.23% 1-Year Performance: +7%
- 1Q2021 results:
- Overall sales +6% organic, adjusted EPS +12.6%
- Pharma segment performing well with sales +7.1% led by key franchises
- Beat largely lead by Darzalex, Xarelto and Tremfya
- Vaccines accounted for $100M in sales
- Consumer segment: -3% due to last year’s customer stocking at home, and lower sales in cough, cold and flu medications
- Medical Devices: showing signs of recovery from last year with +8% sales growth – US grew 5.4% while outside US grew 16.5%
- Management team is bullish on rest of year outlook for this segment, US healthcare system ended the quarter at 90-105% of normal volumes – Europe varies more country by country
- Dividend increased by 5%
- CFO quote: “So across all three parts of our business I think there is a real good take away there that the business is healthy and strong you couple that with the investment, we continue to make in R&D at elevated levels, I would hope folks feel really good about not just our performance of today, but our future performance on the horizon.”
- 2021 guidance narrowed – we view it as conservative, leaving room to be raised as Covid pressures diminish during the year
- Revenue slightly raised: from 8.0%-9.5% to 8.7%-9.9% organic – not including the Covid-19 vaccine sales – a source of upside going forward
- Covid vaccine sales are selling on a not-for-profit basis, but 1Q was impacted by vaccines expenses ($0.05-$0.10) so recouping those costs in future sales is a possibility.
- The management team indicated that once the pandemic is behind us, sales of Covid vaccines could be at a profit
- EPS guidance narrowed: $9.42-$9.57 (vs $9.40-$9.60)
- In a separate event, the European Medicines Agency’s Safety Committee completed its review of the vaccine following rare cases of blood clots
- The committee confirm that the overall benefit vs. risk profile of the vaccine remains positive – shipments to Europe to resume
- All cases happened to people under 60 (mostly women) within 3 weeks of receiving the shot
- Not able to identify specific risk factors at this time
- Cases were similar to the Astra-Zeneca vaccine – they both employ a similar adenoviral vector technology – different from the messenger RNA technology used by Pfizer/BNTX and Moderna
- A notice should be added to the product information
- The US CDC should provide some data on Friday following its planned review meeting
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