Johnson & Johnson (JNJ 0.24%) is a global healthcare leader renowned for its pharmaceutical and medical device segments. The Q3 2024 earnings report it released on Oct. 15 revealed a mixed quarter. While the company achieved 5.2% year-over-year growth in revenue to $22.5 billion, adjusted earnings per share (EPS) fell by 9% to $2.42 due to a significant one-time charge and acquisition costs. Overall, the company demonstrated strong sales growth in its core segments in the quarter, but faced challenges impacting its bottom line.
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Sales | $22.5 billion | $21.4 billion | 5.2% |
| Adjusted EPS | $2.42 | $2.66 | (9.0%) |
| Net earnings | $2.7 billion | $4.3 billion | (37.5%) |
| U.S. sales | $12.9 billion | $12.0 billion | 7.6% |
| International sales | $9.6 billion | $9.4 billion | 2.2% |
Overview of Johnson & Johnson's Business
In the wake of last year's spinoff of its consumer health segment into the new public company Kenvue, Johnson & Johnson operates globally in two main segments: innovative medicine and medtech. Its core focus areas are developing solutions addressing unmet medical needs, providing advanced medtech devices, and maintaining a strong pharmaceutical portfolio. Its pipeline advancements, strong sales of key products like Darzalex, and regulatory approvals are central to its business outlook.
Innovative medicine products such as Stelara and Darzalex are key revenue drivers. The medtech business is also focused on expanding its portfolio, particularly through acquisitions like Shockwave Medical and V-Wave, both of which enhanced its position in the cardiovascular care market.
Q3 2024 Notable Events
In Q3 2024, Johnson & Johnson's innovative medicine segment reported a 6.3% operational sales growth, with oncology and immunology products leading the way. Substantial demand for Darzalex and other top-performing oncology drugs contributed to this growth. However, the segment contended with biosimilar competition and regulatory pressures impacting legacy products such as Stelara.
Medtech demonstrated operational sales growth of 6.4%, mainly due to its expanding cardiovascular product line. This growth was attributed to the integration and development of new capabilities from recent acquisitions, notably in cardiovascular and surgical systems. Advanced surgery product sales, however, faced downward pressures that partially offset those gains.
The company made significant regulatory strides with the approvals of Tremfya for ulcerative colitis and the combination treatment of Rybrevant and Lazcluze in oncology. The acquisition of V-Wave will further support its medtech segment growth, but acquisition expenses took a bite out of Johnson & Johnson's earnings.
On the financial side, one-time charges related to acquisitions and the impacts of in-process research and development (IPR&D) expenses weighed on the company's results. Net earnings dropped 37.5% to $2.7 billion, primarily due to special charges and integration costs.
Looking Ahead
Johnson & Johnson’s management expressed cautious optimism, raising operational sales guidance for the year due to robust segment performance in Q3. However, 2024's adjusted operational EPS guidance was revised downwards to $9.91 from $10.15 due to the expenses associated with the V-Wave acquisition.
The company remains focused on expanding its medtech and innovative medicine segments, capitalizing on new product launches and advancements in its R&D pipeline. Investors should keep an eye on the performance of its oncology and immunology products given their significant contribution to the company's revenue and ongoing market competition. Continued innovation and effective lifecycle management of key pharmaceutical products will be crucial for future growth.
