Johnson & Johnson tops fourth-quarter expectations but signals sales to slow this year

Psoriasis treatments and cancer drug sales propelled Johnson & Johnson to another quarterly earnings beat, while sales of its signature baby products and other consumer goods showed slight improvement.

The health-care conglomerate, which makes everything from Neutrogena face wash to Acuvue contacts to prescription drugs like Xarelto and Invokana, reported its fourth-quarter earnings before the markets opened Tuesday.

The company offered its financial forecast for 2019 that was close to what Wall Street is expecting on profit but fell short on sales’ estimates.

“As you’ve heard me say before, while we’re pleased with our 2018 performance it’s important to remember that we are never satisfied,” Johnson & Johnson CEO Alex Gorsky told analysts Tuesday on a conference call to discuss earnings results.

Shares of J&J fell by about 1 percent Tuesday morning.

Here’s what the company reported during the last three months of 2018 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.97, adjusted, vs. $1.95 expected
  • Revenue: $20.4 billion vs. $20.2 billion expected

In the fourth quarter, Johnson & Johnson reported net income of $3.04 billion, or $1.12 per share, up from a loss of $10.7 billion, or a loss of $3.99 per share a year earlier due to amortization expenses and special items. Excluding an amortization expense of $1 billion and a net charge for special items of $1.4 billion, J&J earned $1.97 per share, above the $1.95 per share expected by analysts surveyed by Refinitiv.

Net sales rose 1 percent to $20.4 billion, above expectations of $20.2 billion. The company has now beaten consensus earnings estimates 21 quarters in a row and revenue 14 of the past 21 quarters.

J&J forecast 2019 earnings of between $8.50 and $8.65 per share and revenue in the range of $80.4 billion to $81.2 billion. Analysts previously said they expected earnings $8.60 per share and $82.69 billion in revenue, according to Refinitiv.

The company is divided in three main business units: pharmaceuticals, medical devices and consumer products. Prescription drug sales accounted for half of the $81.58 billion in revenue J&J generated in 2018.

Pharmaceutical sales continued to shine for J&J in the quarter. Sales reached $10.19 billion, surpassing the $9.99 billion analysts had expected. Anti-inflammatory treatment Stelara posted better-than-expected sales of $1.44 billion, while Simponi fell short at $482 million in sales, compared with the average estimate of $573.3 million, according to StreetAccount.

Prostrate cancer drug Zytiga generated $786 million in revenue during the quarter, exceeding StreetAccount expectations of $695.5 million. A judge last year invalidated a patent on Zytiga, allowing generic versions to enter the market. Despite Zytiga’s success in the quarter, some investors worry the loss of the patent will erode future sales, Jefferies analyst Jared Holz told CNBC.

J&J’s consumer business improved slightly, matching sales estimates of $3.55 billion in the quarter, a slight improvement from the $3.54 billion in revenue it generated during the same quarter in 2017. Sales of baby care products, which includes baby powder, washes and lotions, dipped to $473 million from $490 million in the fourth quarter of 2017. J&J relaunched the line and introduced new products over the summer in hopes of spurring a comeback for the struggling segment.

Its medical device segment continued to struggle. Sales totaled $6.67 billion, short of the $6.68 billion Wall Street had anticipated and down more than 4 percent from $6.97 billion in the same period a year earlier.

J&J’s usually steady stock has been under pressure recently. A December report from Reuters said J&J knew for decades its talc baby powder contained asbestos. The company has repeatedly denied any wrongdoing and stands behind its namesake baby powder.

Since Reuters published its report, J&J shares have fallen by about 9.5 percent. Analysts called the selloff overdone, saying any litigation risk would cost less than the billions of dollars J&J lost in market cap.

“We remain committed to ensuring that facts about talc are understood and we will continue to defend the safety of our products,” Gorsky said Tuesday.

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