Johnson & Johnson (JNJ) shares popped Tuesday after the Dow Jones component topped Wall Street's revenue expectations, which one analyst attributed to better-than-expected pharmaceutical sales.
XOn the stock market today, J&J stock jumped 3.5%, to 129.11
RBC Capital Markets analyst Glenn Novarro had called for pharmaceutical sales growth to slow in the second quarter, following 7.5% organic growth in the first quarter. But worldwide sales of pharmaceuticals rose 11% organically to $10.35 billion, beating his view for $9.86 billion.
"Based on the prescription trends in the U.S. for major brands, we were expecting a deceleration in pharma growth," he said. "However, U.S. sales for several brands, including Simponi, Stelara, Zytiga and Uptravi exceeded our estimates and led to a significant revenue beat."
Total sales of $20.83 billion grew 10.6% year over year. That beat the consensus of analysts polled by Zacks Investment Research for $20.25 billion. Adjusted income of $2.10 per share rose 14.8%, beating analysts' average view by 4 cents.
Medical Device Sales
J&J Chief Executive Alex Gorsky cited double-digit pharmaceutical growth and acceleration in medical devices for the second-quarter outperformance. Sales of medical devices tacked on 2.9% organic growth in the quarter to $6.97 billion. Novarro had called for $6.93 billion in sales.
Trends in medical devices should benefit Stryker (SYK), Intuitive Surgical (ISRG) and Medtronic (MDT), Evercore analyst Vijay Kumar said in a note. Diabetes and orthopedic devices sales lagged the consensus by 2.6% and 1%, respectively.
Stryker will benefit from competitive pressure facing J&J's knee devices in the U.S. Advanced surgery sales were flat sequentially, but some devices in the segment grew slightly, signaling that Intuitive's U.S. procedures could top. Trends in general surgery may bode well for Medtronic.
Consumer segment sales, though, grew just 0.9% organically to $3.5 billion, missing the model of RBC analyst Novarro for $3.62 billion. Beauty product sales lagged while baby and wound care revenue topped expectations. In the U.S., sales decreased 0.7%.
For the year, J&J guided to sales of $80.5 billion to $81.3 billion, below the consensus for $81.66 billion. Adjusted income is expected to come in at $8.07-$8.17 per share, which lagged analysts' views by a penny at the midpoint.
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