Key takeaways:
Current Price: $183 Price Target: $200
Position size: 2.44% 1-Year Performance: +9%
- Overall sales +7.7% ex-FX, +2.7% in the US and +12.6% International (driven by Europe)
- Operating margins came below expectations
- Adjusted EPS +6.2%
- JNJ continues to outperform in its pharma segment, although this has been muted in part by lower consumer segment performance
- Pharma segment performing well with sales +9.3%, but came below expectations due to covid vaccine sales and Xarelto performance
- Oncology (Darzalex gained market share), infectious diseases (covid vaccine), neuroscience and immunology (Stelara growth for Crohn’s) all positive growth, but cardiovascular negative growth (Xarelto pricing)
- Consumer segment: +0.8% organic growth
- Growth in over-the-counter medicine (Tylenol & Motrin) and women’s health (restocking & price increases) but weakness in skin health/beauty (supply chain issues), oral care, wound care and baby care
- Inflation has the biggest impact on this segment
- Medical Devices: +8.5% organic sales growth is showing good signs of improvements, with the omicron variant having a lesser impact than expected
- Growth in all sub-segments thanks to covid impact recovery
- Strength in this segment is a positive for our other medical devices names (SYK up on good news)
- Impact from China lockdowns will continue in April and May
- Recovery is helped by procedures being done more often in outpatient settings rather than hospitals, a move that the pandemic accelerated
- Diagnostics volume is now in line with pre-covid levels at the end of March
- Focus on adding to this segment through M&A is possible
- 2022 initial guidance:
- Revenue $97.3B-$98.3B or up 6.5% to 7.5% is maintained from January guidance but now excludes covid vaccines sales
- Guidance for vaccines is no longer provided due to supply chain (surplus) & demand uncertainty
- Pharma: above market growth continues, consistent throughout the year
- Medical devices: continued recovery expected, with prior launches to help
- Consumer health: supply chain constraints continue in 1H22, improvement in 2H
- 50bps operating margin expansion (no change to guidance)
- EPS $10.60-$10.80 represents 8.2% to 10.2% growth y/y
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