Johnson & Johnson|Fundamental Analysis|Price action| MUST READ!
In a nutshell, Johnson & Johnson's third-quarter results were generally good. The company reported a 10.7% year-over-year increase in revenue to $23.3 billion. Adjusted earnings per share rose 18.2% to $2.60, well above the consensus estimate of $2.35.
Given the large earnings outperformance, you'd probably think the health care company's stock should have rallied Tuesday after the quarterly report was released. And you'd be right. J&J stock opened up about 1% and gained even more momentum during the day. Perhaps the rise would have been greater had it not been for the company's third-quarter earnings, which came in below analysts' average forecast of $23.7 billion.
But there was more to this story for the health care giant than just the underlying numbers. Here are three things you might have missed about Johnson & Johnson's third-quarter results.
First and foremost, three products accounted for 63% of the growth.
Many investors love Johnson & Johnson largely because of its diversification. The company has three multi-billion dollar business segments targeting different areas of healthcare. Hundreds of products are sold in these segments. In 2020, J&J claimed 28 products or platforms with annual sales of more than $1 billion.
Although Johnson & Johnson's business is broadly diversified, the drivers of its growth in the third quarter were not. Just three products accounted for about 63% of the company's total revenue growth. These products accounted for nearly 90% of J&J's pharmaceutical sales growth.
Not surprisingly, the COVID-19 vaccine tops the list. It brought in $502 million in the third quarter, up from no revenue the previous year.
The multiple myeloma drug Darzalex took a respectable second place. Sales of the drug totaled $1.58 billion in the third quarter, up 43.7% from nearly $1.1 billion in the same quarter in 2020.
J&J's Stelara drug was the third-largest growth driver in the third quarter. Sales of the plaque psoriasis and psoriatic arthritis drug totaled $2.38 billion in the quarter. That's a 22.2% increase over sales of $1.95 billion in the previous quarter.
Second, it's important to keep in mind that the COVID-19 pandemic continues to have a major impact beyond just the vaccine.
Johnson & Johnson's COVID-19 vaccine certainly contributed significantly to the good third-quarter results. And it could make an even bigger furor in the future. J&J is likely to benefit significantly from booster sales (if, as expected, it gets approved for boosters). However, COVID-19 also continues to have a significant impact on J&J's fortunes beyond the vaccine.
Johnson & Johnson's consumer health business, for example, has been helped by increased sales of the drug Tylenol. The company noted that some of the increase in sales of the over-the-counter drug was due to its use to relieve vaccine-induced symptoms. J&J also reported that sales of ORSL HCP electrolyte drinks increased due to relief of COVID-19 symptoms.
It wasn't all good news, however. Sales bans in parts of the Asia-Pacific region had a negative impact on sales of baby care products. The company said growth in sales of its Imbruvica cancer drug was partially held back by COVID-19-related dynamics. In addition, sales of J&J's orthopedic medical products in the spine, sports, and other category fell mainly because of the impact of COVID-19 on the market.
Finally, the company is now on the cusp of an international tipping point.
Although based in the U.S., Johnson & Johnson has been a major competitor in global markets for most of its history. And now the health care giant is nearing a crucial international stage.
In the third quarter, J&J's U.S. sales rose 7.9 percent year over year to just under $12 billion. Its international sales jumped 13.8% to $11.4 billion. International markets now account for 48.7% of total revenue. At the current rate of growth, by next year more than half of Johnson & Johnson's revenue will come from outside the United States.
Investors should see this as a decidedly positive trend. Greater geographic diversification of revenues could make Johnson & Johnson even more stable than it is now.
Given the large earnings outperformance, you'd probably think the health care company's stock should have rallied Tuesday after the quarterly report was released. And you'd be right. J&J stock opened up about 1% and gained even more momentum during the day. Perhaps the rise would have been greater had it not been for the company's third-quarter earnings, which came in below analysts' average forecast of $23.7 billion.
But there was more to this story for the health care giant than just the underlying numbers. Here are three things you might have missed about Johnson & Johnson's third-quarter results.
First and foremost, three products accounted for 63% of the growth.
Many investors love Johnson & Johnson largely because of its diversification. The company has three multi-billion dollar business segments targeting different areas of healthcare. Hundreds of products are sold in these segments. In 2020, J&J claimed 28 products or platforms with annual sales of more than $1 billion.
Although Johnson & Johnson's business is broadly diversified, the drivers of its growth in the third quarter were not. Just three products accounted for about 63% of the company's total revenue growth. These products accounted for nearly 90% of J&J's pharmaceutical sales growth.
Not surprisingly, the COVID-19 vaccine tops the list. It brought in $502 million in the third quarter, up from no revenue the previous year.
The multiple myeloma drug Darzalex took a respectable second place. Sales of the drug totaled $1.58 billion in the third quarter, up 43.7% from nearly $1.1 billion in the same quarter in 2020.
J&J's Stelara drug was the third-largest growth driver in the third quarter. Sales of the plaque psoriasis and psoriatic arthritis drug totaled $2.38 billion in the quarter. That's a 22.2% increase over sales of $1.95 billion in the previous quarter.
Second, it's important to keep in mind that the COVID-19 pandemic continues to have a major impact beyond just the vaccine.
Johnson & Johnson's COVID-19 vaccine certainly contributed significantly to the good third-quarter results. And it could make an even bigger furor in the future. J&J is likely to benefit significantly from booster sales (if, as expected, it gets approved for boosters). However, COVID-19 also continues to have a significant impact on J&J's fortunes beyond the vaccine.
Johnson & Johnson's consumer health business, for example, has been helped by increased sales of the drug Tylenol. The company noted that some of the increase in sales of the over-the-counter drug was due to its use to relieve vaccine-induced symptoms. J&J also reported that sales of ORSL HCP electrolyte drinks increased due to relief of COVID-19 symptoms.
It wasn't all good news, however. Sales bans in parts of the Asia-Pacific region had a negative impact on sales of baby care products. The company said growth in sales of its Imbruvica cancer drug was partially held back by COVID-19-related dynamics. In addition, sales of J&J's orthopedic medical products in the spine, sports, and other category fell mainly because of the impact of COVID-19 on the market.
Finally, the company is now on the cusp of an international tipping point.
Although based in the U.S., Johnson & Johnson has been a major competitor in global markets for most of its history. And now the health care giant is nearing a crucial international stage.
In the third quarter, J&J's U.S. sales rose 7.9 percent year over year to just under $12 billion. Its international sales jumped 13.8% to $11.4 billion. International markets now account for 48.7% of total revenue. At the current rate of growth, by next year more than half of Johnson & Johnson's revenue will come from outside the United States.
Investors should see this as a decidedly positive trend. Greater geographic diversification of revenues could make Johnson & Johnson even more stable than it is now.
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