Johnson & Johnson
JNJ
sales have missed analyst estimates in the last three quarters and a quick look at the segment and product line performance gives us some insights-
The Consumer side of the business has been underperforming analyst estimates from 2018 through 2021, although by less than a percentage point. However, the OTC/Nutritionals category missed only in 2020, possibly because analysts got a bit ahead of themselves.
In the last few quarters, OTC/Nutritionals has again pulled ahead of the others, in terms of performance versus estimates. And being the largest category within Consumer, it accounted for the better-than-expected segmental performance in the last quarter.
In fact, the consumer business remains supply constrained, with the skincare/beauty category being particularly hard-hit. Others, including oralcare (impacted by product line rationalization and difficult comps in the last quarter), babycare (supply constaints and accounting adjustments), woundcare (divestiture, difficult comps, U.S. benefited from promos) and womens health (improved supply and pricing were positives) have also been performing below analyst expectations in the last few quarters.
The Pharmaceuticals business usually beats analyst expectations, although it missed by less than a percentage point in 2021. The surprise trend remains negative for this business (average miss of about a percentage point in the last five quarters with a 6.7% miss in the last). That doesn’t mean that the business isn’t growing – it was up 9.3% in the last quarter, with Cardiovascular being the only category that declined.
Medtech was up across categories in the last quarter.
Overall, U.S. revenues have a slightly better record of beating estimates than International, having missed in two of the last five quarters compared to International’s three. The trend doesn’t look positive either, with U.S. revenues missing estimates in each of the last two quarters and International missing in each of the last three.
With supply constraints expected to alleviate in the second half and demand normalizing from the second quarter itself, the rest of the year is expected to yield “relatively consistent growth.” As such, management reiterated 2022 non-GAAP sales guidance at the end of the last quarter, while lowering reported sales guidance.
Accordingly, in 2022, management expects sales of $97.8 billion (reported sales $95.3 billion) at the mid-point. COVID-19 Vaccine sales guidance has been suspended and hence isn’t included in these numbers, so estimates could go awry.
As of now, analysts are looking for $96.65 billion in 2022 sales, which is somewhere between management’s reported and operational numbers. Of this, $47.17 billion is expected to come from International and $49.47 from the U.S. Pharmaceuticals is expected to fetch $53.42 billion and Consumer $14.84 billion.
Johnson & Johnson shares carry a Zacks Rank #3 (Hold). Stocks with stronger prospects include Bayer
BAYRY
, AbbVie
ABBV
and Merck & Co.
MRK
.
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