Key takeaways:
Current Price: $164 Price Target: $200
Position size: 2.05% 1-Year Performance: +11%
- 3Q2021 results:
- Overall sales +10% organic, adjusted EPS +16.4%
- Pharma segment performing well with sales +13% organically, higher than last quarter of +11%
- Covid vaccine sales below expectations, but still expect and additional 300bps growth from vaccine sales for the year
- Oncology +16.5% – growth in multiple drugs (Darzalex, Imbruvica)
- Infectious diseases +60% strong growth (covid vaccine added growth vs. last year)
- Immunology +12% growth in Stelara (Crohn’s disease, Tremfya for psoriasis)
- Pulmonary Hypertension +16% – share gains in Opsumit and Uptravi
- Cardiovascular/other only sub-segment negative growth -12% due to biosimilar competition
- Consumer segment: +4% growth
- Growth driven by over-the-counter (OTC) drugs +18%
- Medical Devices: +7% organic sales growth
- Growth driven by market recovery post pandemic, new product introduction success
- Modest impact from covid Delta
- EPS growth driven in part by lower taxes
- Surgical robot Ottava for general surgery is delayed another 2 years … this is a positive for Medtronic that is developing a similar robot.
- Earnings call quote:
- Robot: “a first in-human delay of approximately two years from our earlier projections of the second half of 2022, reflecting technical development challenges and COVID-19 related disruptions, including supply chain constraints being experienced broadly across all industries.”
- Labor shortages: ” When we look at quarter four, we do expect to see continued improvement. We do expect hospitals are going to have to continue to manage through labor shortages, I don’t expect that to get better in quarter four nor in 2022, but they’ve been quite masterful and how to manage patient close.”
- ” We are, when I talk to hospital systems over the past three weeks in particular, in the United States, they are ramping up again and resuming elective procedures.”
- New CEO Joaquin Duato to transition January 2022
- 2021 guidance raised:
- Revenue raised slightly on the lower end due to core sales growth – nothing meaningful though but a positive signs in the wake of the Delta variant
- Tax rate is lowered due to one-time benefits
- EPS increased due to good operational growth and lower tax rate
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