Johnson & Johnson raised its outlook Tuesday in the first quarter since spinning off its consumer health division, Kenvue. But JNJ stock yo-yoed and fell.
The company is trying to reinvent itself, focusing on innovative medicines and medtech following the split from Kenvue, which was finalized in August. But medtech sales came up short due to lackluster growth in orthopedic spinal care, especially internationally, Third Bridge analyst Lee Brown said in a report.
"The market wanted to see sustained robust momentum, and while the segment posted growth of 10% year over year, the performance fell short of expectations by nearly 2%," he said.
On today's stock market, JNJ stock dipped 0.9%, closing at 156.09.
JNJ Stock: Refocusing On Drugs, Medtech
Overall, third-quarter sales climbed 6.8% on a strict, as-reported basis to $21.35 billion. That beat Wall Street's expectations for $21.04 billion, according to FactSet. Adjusted earnings of $2.66 per share surged 19.3% and topped projections for $2.52.
Following the Kenvue split, Johnson & Johnson divides its business into just two segments: innovative medicines and medtech. Sales of the former advanced 5.1% to $13.89 billion, while sales from medtech devices jumped 10% to $7.46 billion.
Notably, sales of multiple myeloma treatment Darzalex rocketed almost 22% to $2.5 billion, "propelled by continued share gains across all regions," Third Bridge's Brown said. But Leerink Partners analyst David Risinger said in a report that missed expectations by 2%.
Revenue from another cancer drug, Imbruvica, tumbled more than 11% to $808 million, though were narrowly above forecasts, Risinger said. Brown, the Third Bridge analyst, says Imbruvica is struggling "due to global competitive pressures."
Meanwhile, medtech sales edged 6% higher on an organic basis, driven mostly by electrophysiology and interventional solutions, Evercore ISI analyst Vijay Kumar said in a report. He notes electrophysiology sales soared more than 20% organically, which could put pressure on rival Boston Scientific. Boston Scientific shares fell alongside JNJ stock on Tuesday.
Fourth Quarter Could See A Boost
Johnson & Johnson also raised its outlook for the year and now expects adjusted earnings of $10.07 to $10.13 per share and $83.6 billion to $84 billion in sales. The earnings guidance topped analysts' view for $10.03 per share. But JNJ stock analysts called for a higher $84.49 billion in sales.
"Given third-quarter revenue was in line with consensus, the guidance bump implies upward pressure on consensus fourth-quarter revenue estimates," Leerink's Risinger said.
He kept his outperform rating on JNJ stock.
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