Shares of Johnson & Johnson JNJ traded approximately 0.5% below the flatline on Thursday on the heels of reporting declining sales during the second quarter. Despite the decline, the company raised its full-year earnings guidance and reported progress on its Covid-19 vaccine candidate.
For the quarter ending June 30, the New Brunswick, New Jersey-based company reported net income of $3.626 billion, or $1.36 in diluted earnings per share, compared with net income of $5.607 billion, or $2.08 in diluted earnings per share, in the prior-year quarter.
Company reports sales decline as coronavirus impacts medical operations
Johnson & Johnson reported net sales of $18.34 billion, down 10.8% from the previous quarter sales of $20.56 billion. Operational sales tumbled 9%, driven by sales decline in the company’s consumer health and medical device segments.
Sales in the medical devices segment tanked 32.5%, driven by the deferral of medical procedures of the company’s surgery, orthopedics, vision and interventional solutions businesses. Additionally, surgery revenues declined over 20% on the back of competitive pressures in the U.S.
Consumer health and pharmaceutical revenues partially offset decline
Johnson & Johnson Chairman and CEO Alex Gorsky said that despite the sales decline in consumer health and medical devices, sales in the pharmaceutical segment increased 3.9%, driven by “continuing growth” in areas like immunology, infectious diseases, neuroscience and oncology. Each of the four areas saw at least 1.6% growth during the quarter, with neuroscience increasing 3.2% on strong demand for paliperidone long-acting injectables and oncology increasing 3.5% on strong market growth and share gains for Darzalex and patient uptake for Imbruvica.
Company updates progress for coronavirus vaccine
Johnson & Johnson Chief Scientific Officer Dr. Paul Stoffels said during the earnings call that the company has accelerated a Phase 1/2a study of its Covid-19 vaccine candidate from September to late July based on strong preclinical data and interaction with regulatory authorities. The randomized, double-blind study expects to evaluate the safety, vaccination response and immune response of the investigational vaccine recombinant in approximately 1,000 adults aged between 18 and 55 and adults over the age of 65.
Stock dips despite higher earnings guidance
Shares of Johnson & Johnson dipped to an intraday low of $146.68, down 1% from Wednesday’s close of $148.26 as sales declines outweigh improved earnings guidance. The year-over-year change in adjusted operational sales are expected to range between -0.8% and 1%, up from the April guidance of between -3% and 5%. Likewise, estimated earnings per share are expected to range between $7.75 and $7.95, up from the previous guidance of between $7.50 and $7.90.
GuruFocus ranks Johnson & Johnson’s profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, a 3.5-star business predictability rank, and an operating margin that is outperforming over 91% of global competitors despite declining approximately 2% per year on average over the past five years.
Gurus with holdings in Johnson & Johnson include Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Yacktman Asset Management (Trades, Portfolio) and T Rowe Price Equity Income Fund (Trades, Portfolio).
Disclosure: No positions.
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