Johnson & Johnson CEO Alex Gorsky. Source: Johnson & Johnson. 

While Wall Street waits for the nation's biggest banks to open their report cards for the third quarter, healthcare conglomerate Johnson & Johnson (NYSE:JNJ) kicked off earnings season for the healthcare sector in a mixed way.

Johnson & Johnson, by the numbers
For the third quarter, Johnson & Johnson reported $17.1 billion in sales, a 7.4% decline from the $18.5 billion recorded in the year-ago quarter, and an adjusted net profit of $4.2 billion, or $1.49 per share, a decrease of 9.4% and 7.5%, respectively, from Q3 2014. Comparatively, Wall Street was expecting Johnson & Johnson to report $310 million more in revenue; however the company's EPS-topping streak continued with the Street anticipating only $1.44 in adjusted earnings per share.

Additionally, Johnson & Johnson lifted its full-year adjusted EPS guidance to a new range of $6.15 to $6.20, up from a prior forecast of $6.10 to $6.20, and it announced a $10 billion share repurchase agreement roughly an hour prior to the release of its third-quarter results.

Headline numbers like these are always what Wall Street and short-term traders tend to focus on, and they can indeed offer an extremely quick synopsis of how a company performed during the previous quarter. However, relying solely on headline numbers leaves the long-term investor at a substantial disadvantage. We need to be able to claw below the surface and examine what it is that led J&J to arrive at the sales and EPS declines reported above. Only then can we truly ascertain the health of the business and whether or not Johnson & Johnson is still a good investment.

With that being said, here are few of the finer points from Johnson & Johnson's report that you should be aware of.

Source: Federal Reserve Bank of New York. 

Currency moves played a big role in J&J's weak sales results
Johnson & Johnson did a lot better than you think if you remove the negative effects of currency translation during the third quarter.

As the U.S. dollar strengthens against foreign currencies, consumers in the U.S. cheer because it means we can buy more in overseas markets while on vacation. On the flipside, it means multinational companies like J&J lose money when they translate foreign currency into U.S. dollars, which is the currency they report sales and profits in. As the company notes early on in its quarterly press release, currency translation had a negative 8.2% effect on sales. Removing this effect, operational growth was actually positive 0.8%. That's not exactly growth to write home about, but it's much better than a 7.4% contraction, and it demonstrates on an apples-to-apples basis that J&J's core business is still growing.

... but so did divestitures and one particular drug
We also have to keep in mind that Johnson & Johnson, which is made up of more than 250 subsidiaries, is constantly transforming its business through acquisitions and divestments.

During the quarter it completed the divestiture of Splenda to privately-held Heartland Food Products Group to better its focus on its healthcare segments. It also recently agreed to sell Cordis, a cardiovascular device maker, to Cardinal Health (this deal hasn't closed yet), and it completed the divestiture of its Ortho-Clinical Diagnostics unit for $4 billion in June 2014. In sum, this lost revenue from divestments can trick investors into believing growth was slower because the comparisons being made aren't apples-to-apples.

Additionally, the emergence of oral hepatitis C therapies such as Sovaldi, Harvoni, and Viekira Pak have practically rendered Johnson & Johnson's prior-generation HCV therapy Olysio (known as Sovriad in overseas markets) obsolete. Sales for the older hepatitis C therapy fell 96% year over year in the U.S. to $26 million from $671 million, and globally by 90% to $79 million from $796 million. This sales drop-off was expected and surprises no one, yet it's wreaking havoc on J&J's top- and bottom-line.

If divestitures, acquisitions, and Olysio are removed from the equation, global sales increased 5.6%, led by a 7.7% domestic sales increase. Also adjusted EPS on an operating basis would have risen by 1.2% sans divestitures, acquisitions, and Olysio.

Source: Johnson & Johnson.

Invokana showing signs of slowing?
Next-generation SGLT-2 inhibitor Invokana for type 2 diabetes turned in another strong year-over-year showing with 97% operational growth and global sales of $340 million.

However, what's noteworthy is that sequential quarterly sales growth for Invokana was only 6.9%. I know what you might be thinking, and yes, nearly 7% sequential quarterly sales growth for a blockbuster drug is still impressive. However, it's a bit suspicious that growth slowed noticeably in Q3 given that its peer Eli Lilly and privately held partner Boehringer Ingelheim reported in August that their SGLT-2 inhibitor Jardiance led to a risk reduction of cardiovascular events in high-risk CV-event patients in a long-term study. Backing its findings up with equally impressive data in September, it'll be curious to see if Invokana and AstraZeneca's Farxiga cede market share to Jardiance in the coming quarters. It's a bit too early to tell here considering the data release came toward the end of Q3, but we should have a much better idea on Jardiance's sectorwide effect when J&J reports its Q4 results.

Imbruvica is growing, but not at a breakneck pace
After a brief slowdown in U.S. sales in the first quarter, which was likely due to drug stockpiling, growth for Imbruvica remained strong during the quarter. Total sales of the drug improved on a sequential quarterly basis to $184 million from $154 million.

Source: Johnson & Johnson.

However, U.S. sales grew by just 10%, with international sales providing the bulk of the sales growth. It's a bit difficult to tell what's caused U.S. sales to again slow a bit, but my guess is it could have to do with Imbruvica's lofty price point that's near $100,000 annually, the struggle to gain broader insurance coverage, and the need to educate physicians about the relatively-new drug.

Let's not forget that Imbruvica's multi-billion potential is based on its ability to expand into new indications, so its sales lumpiness in the early going shouldn't yet be cause for concern. Nonetheless, it's something worth keeping an eye on.

Medical devices showed signs of life in the U.S.
This might be a case of pinching pennies here, but I was pleased to see Johnson & Johnson's medical device segment demonstrate some signs of life after multiple quarters of exceptionally stagnant growth.

As expected, currency movements in international markets pushed global medical device revenue down 7.3%. However, removing currency moves from the equation led to 0.9% operational growth. What I found impressive was the 2% growth in medical devices within the unpredictable U.S. market.

Growth in devices within the U.S. has been stymied in recent years by uncertainties tied to the rollout of Obamacare. New ways of purchasing healthcare and receiving medical care have caused consumers and hospitals alike to hold back on discretionary spending, meaning procedures that don't have to be done immediately are occasionally being put off. The uptick in sales could imply that consumers and/or hospitals are beginning to feel more comfortable with their current expenses, which would be a great sign for J&J moving forward.

Source: Pixabay.

Is Johnson & Johnson still a buy?
Understandably, buying into J&J, a company with a quarter of a trillion dollar market value, isn't going to translate into a double overnight. However, Johnson & Johnson's well-diversified business continues to grow on an operational basis, and it has a deep pipeline of pharmaceutical products that could churn out another 10 blockbusters before the end of the decade.

Also, it continues to do right by its shareholders in the form of share buybacks and dividends. It's not the cheapest healthcare stock of the bunch, and it may not have the highest dividend, but when it comes to buying stock market tortoises that slowly but surely cross the finish line year in and year out, I'd gladly suggest that J&J still appears to be a great company to own over the long term.