Right now is the calm before the storm -- the earnings storm, that is. It's a great time to review YTD results so far from your favorite companies and get your checklist together to see if they're on track when the next quarter's results come in. In the case of Johnson & Johnson (NYSE:JNJ), a behemoth blue chip known for stable dividends and deep product pipelines, there are a few key numbers that you have to keep an eye on before Q2 results are reported.
What does pharmaceutical sales volume look like?
J&J's pharmaceutical division accounts for $7.7 billion of the company's $17.4 billion in Q1 sales. Overall growth in the pharmaceutical business segment was a little more than 10% year over year, excluding currency impacts. This was largely due to strong performance from Invokana, a type 2 diabetes drug, as the drug gains market share over competitor AstraZeneca and Bristol-Myers Squibb's Farxiga. With Farxiga receiving some negative press over the past year over a potential risk of bladder cancer, Invokana should continue to grab market share and maintain its strong growth rate.
Where did all the medical devices go?
On the flip side, a number to be wary of in the next earnings release is the slowdown in medical devices. Q1 showed a decrease of 4.6% over 2014 excluding currency impacts, with big impacts from diagnostics and vision care products. This has been an ongoing trend for J&J over the past few years, with the company saying repeatedly that it is looking to trim slow product units. This was evidenced by its sale last year of its Ortho-Clinical Diagnostics business to The Carlyle Group, and the expected sale later this year of J&J's Cordis unit to Cardinal Health. Foolish contributor Sean Williams hypothesized that this slowdown could be due to uncertainty around Obamacare and future legislation, so staying alert to changes in this area could give us a sneak peak of what to expect from J&J.
Keeping an eye on J&J's vision care unit, also part of medical devices, is key -- $631 million in Q1 sales is not small, and the 9% constant-currency decrease year over year is concerning, particularly as the company attributed it to "competitive pricing" and "buying patterns". This implies downward pressure in the marketplace on vision care in general. Unless J&J can come up with new products for this pipeline then this could be an area of continued trouble.
Money, money, more money
The impact of a strong U.S. dollar is also worth keeping an eye on, as currency values resulted in every single line of business reported by J&J having lower reported international sales in Q1 year over year. Currency fluctuations don't show the actual growth in operations or sales, but they do offer opportunities if the stock drops, as it has this year. For those Foolish investors who are willing to dig into the top-line numbers to see actual operational growth, there's evidence of international operational sales growth in its consumer products (3.1% international operational sales growth with currency impacts dragging that number down by 12.8%) and pharmaceuticals (3.7% international operational sales growth before currency impacts of 14.4%) business units. The size of the impact that currency values have on J&J's business is a good number to keep an eye on -- if currency fluctuations cause further drops in share price that don't reflect weakness in the underlying business, it might be a great opportunity to pick up shares for the long term.
Overall, keep your eyes peeled for the next quarterly earnings release from J&J, scheduled for July 14. All of these critical numbers will get an update during that release to help you evaluate the strength and future prospects of this much-loved healthcare stock.
Shruti Basavaraj Ahluwalia owns shares in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.