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Here's Why Investors Cheered Johnson & Johnson's Q4 Results

By Keith Speights - Jan 26, 2021 at 10:30AM

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The healthcare giant beat Wall Street expectations in Q4 and gave encouraging guidance for 2021.

Johnson & Johnson (JNJ 1.46%) delivered a return of nearly 8% in 2020. Adding in the company's dividend gives a total return of close to 11%. That's not bad, but it fell far short of the S&P 500 index's total return of 18%. But J&J is off to a better start than the S&P 500 so far this year.

That early outperformance for the healthcare stock was at risk as J&J announced its fourth-quarter results before the market opened on Tuesday. As it turned out, though, investors had nothing to worry about. Here are the highlights from Johnson & Johnson's Q4 update.

Female scientist in lab with arms crossed

Image source: Getty Images.

By the numbers

Johnson & Johnson reported revenue in the fourth quarter of $22.5 billion, an 8.3% year-over-year jump. This total easily beat the average analyst estimate of $21.67 billion.

The company announced net income in Q4 of $1.7 billion, or $0.65 per share, based on generally accepted accounting principles (GAAP). This reflected a significant decrease from the GAAP earnings of $4 billion, or $1.50 per share, posted in the prior-year period.

J&J recorded Q4 adjusted net income of $4.97 billion, or $1.86 per share. This topped the consensus Wall Street estimate of adjusted earnings of $1.82 per share. However, it was slightly below the company's adjusted earnings of $5 billion, or $1.88 per share, generated in the same quarter of 2019.

Behind the numbers

Unsurprisingly, Johnson & Johnson's pharmaceutical segment was its primary growth driver in the fourth quarter. The segment's sales soared 16.3% year over year to $12.3 billion. However, pharmaceutical growth was lower -- 8.4% -- when adjusted for acquisitions and divestitures.

J&J's pharmaceutical lineup included multiple big winners in Q4. Sales of multiple myeloma drug Darzalex soared more than 50%. Pulmonary hypertension drug Uptravi and autoimmune disease drug Tremfya weren't too far behind with sales growth of more than 40%. Another autoimmune disease drug, Stelara, and another pulmonary hypertension drug, OpSumit, delivered year-over-year sales growth topping 30%.

The story wasn't as impressive for the company's other two segments, though. Consumer health sales inched 1.4% higher year over year to $3.6 billion. Medical device segment sales slipped 0.7% from the prior-year period total to $6.6 billion.

Acquisitions and divestitures skewed both segments' results. Consumer health sales increased 3.1% year over year excluding the impact of acquisitions and divestitures, while medical device segment sales fell 10.5% with similar adjustments.

J&J's consumer health business was boosted by U.S. growth in over-the-counter products such as Listerine, Pepcid, Tylenol, and Zyrtec. The COVID-19 pandemic hurt the company's medical devices business with delays of medical procedures causing surgery, orthopedics, and vision sales to decline.

The company's GAAP bottom line looked much worse than it did in the prior-year period, primarily because of $2.9 billion in net litigation expenses. 

Looking ahead

Johnson & Johnson anticipates sales for full-year 2021 will be between $90.5 billion and $91.7 billion. This range is a little higher than the average analyst estimate of $89 billion. The company projects adjusted earnings per share for full-year 2021 will be between $9.40 and $9.60. The low end of that range is well above the consensus Wall Street estimate of $8.99.

The big thing to watch with J&J now is the announcement of late-stage results for its COVID-19 vaccine candidate. CEO Alex Gorsky said that the company "continue[s] to progress [its] COVID-19 vaccine candidate and look[s] forward to sharing details from [its] Phase 3 study soon."

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