Johnson & Johnson Q1 Review: Mixed Results, Continued Optimism

Johnson & Johnson NYSE:JNJ is one of the world’s largest healthcare companies, with a diverse product portfolio that includes pharmaceuticals, medical devices and consumer health products. Johnson & Johnson recently released its first-quarter 2024 earnings report, and its first-quarter fiscal 2024 financials are significant for the company and the broader medical device (MedTech) industry, which is part of the widest healthcare sector.

The healthcare sector has faced supply chain disruptions, inflationary pressures and evolving government regulations. Johnson & Johnson’s performance is an early indicator of the health of the sector and its ability to face current challenges. So, what does Johnson & Johnson’s performance in the first quarter of 2024 reveal about the overall health of the MedTech sector and how is the company performing in addressing industrial and economic challenges? Let’s take a look.

Johnson & Johnson Q1 2024: Metrics and Implications

Johnson & Johnson Q1 2024 earnings report delivered mixed results, with solid revenue growth but pressure on profit margins. The company reported total revenue of $21.4 billion, an increase of 2.3% year over year. While modest, this growth reflects resilience in the face of economic hardship. Operating sales growth, which takes into account currency fluctuations, was stronger at 3.9%. This metric clarifies the performance of Johnson & Johnson’s core business, highlighting the increase in demand for its products. Adjusted operating growth, excluding the impact of the COVID-19 vaccine, reached an impressive 7.7%, underscoring the strength of its product portfolio and ability to grow sales even as pandemic-related vaccine demand wanes.

The medtech segment stood out in the first quarter, with operating sales growth of 6.5%, demonstrating Johnson & Johnson’s competitiveness in areas such as electrophysiology (treatment of heart rhythm disorders) and wound closure solutions . The Innovative Medicines segment also showed positive growth, with a 2.5% increase in operating sales (excluding COVID-19 vaccine). While less dramatic than medical technology, this indicates continued demand for Johnson & Johnson pharmaceuticals.

The company has successfully expanded its network profit margin in the first quarter of 2024, resulting in robust GAAP (Generally Accepted Accounting Principles) earnings of $2.20 per share, higher than prior year results. Fixed up earning per share (EPS), which excludes non-recurring items, reached $2.71, a notable increase of 12.4% compared to the first quarter of 2023. This demonstrates the efficiency of Johnson & Johnson and the effectiveness of its cost control amid inflationary pressures.

Johnson & Johnson raised the midpoint of its full-year 2024 forecast for both operating sales and adjusted EPS, signaling the company’s internal optimism about its ability to meet its full-year targets, manage current challenges and deliver value to shareholders.

Decoding the analyst’s perspective

The analyst community reacted favorably to the company’s first quarter results. While maintaining a Hold rating, the consensus price target indicates decent upside potential. This optimism stems from the company’s improving margins, earnings outperformance, and revised full-year forecasts. The analysts feeling suggests that market views Johnson & Johnson stock is currently undervaluedleading to expectations of a stock price rebound in the near term.

Implications for investors

First-quarter performance and analyst outlooks offer some key takeaways for investors. Johnson & Johnson’s track record of increasing dividends stands out in the industry. The company has increased its dividend for 62 consecutive years, a testament to its financial stability. This milestone secures its position as a dividend aristocrat, making it an attractive investment for income-oriented investors looking for consistent, reliable returns. While some insider selling has been noted, this is common practice and does not necessarily signify bearish sentiment about the company’s future. The combination of dividend strength and share price appreciation potential creates an attractive value proposition for investors seeking a mix of income and growth.

A pharmaceutical powerhouse: growth drivers

The Innovative Medicines segment stood out in the first quarter of 2024, demonstrating the company’s continued strength in pharmaceutical products. Several key drugs have fueled this growth, particularly in oncology (cancer treatment) and immunology (treatment of immune system disorders). These include:

• DARZALEX, ERLEADA, CARVYKTI and TECVAYLI: oncology drugs with increasing demand and market share.
• UPTRAVI and OPSUMIT: Drugs that treat pulmonary hypertension, a serious condition that affects the blood vessels in the lungs.
• TREMFYA: Medication that treats plaque psoriasis, a common skin condition
• SPRAVATO: new cure for depression

Importantly, even excluding COVID-19 vaccine sales, the innovative medicines segment has shown solid growth trends. This highlights the underlying strength of Johnson & Johnson’s pharmaceutical portfolio, its success in developing new treatments and its ability to capture market share in competitive therapeutic areas.

MedTech: a challenging sector

Johnson & Johnson’s medtech segment delivered mixed results in the first quarter of 2024. While achieving overall positive sales growth, the performance highlights both the segment’s strengths and challenges. Specific product lines have driven this growth:

• The cardiovascular devices demonstrate the company’s leadership in addressing critical cardiovascular needs, particularly in the area of ​​electrophysiology (treatment of heart rhythm disorders) and in the recent acquisition of Abiomed.
• General surgery solutions, such as wound closure products, have also shown positive growth, underscoring the continued demand for these essential medical tools.

However, navigating an evolving regulatory landscape has proven challenging. The European Medical Device Regulation (MDR) has introduced more stringent standards and compliance requirements, increasing costs and potentially affecting the pace of innovation in the medical technology sector. Johnson & Johnson’s first-quarter results indicate that these regulatory pressures have affected the segment’s profits.

Overall, the performance of the medical sector shows strength. The success of specific product lines highlights the company’s focus on high-demand areas and its ability to provide innovative solutions. However, the medical technology sector in general continues to grapple with regulatory changes, which investors should monitor as a potential risk factor.

Johnson & Johnson’s first quarter 2024 results show the company’s resilience in the face of economic and industry pressures. Positive revenue growth, strong pharmaceutical sales and improved margins demonstrate the company’s ability to meet challenges. Success in key areas of medical technology such as oncology and cardiovascular devices highlights the continued demand for innovative solutions. Overall, Johnson & Johnson’s first-quarter report offers a cautiously optimistic signal for the industry, showing the potential for adaptability and success in a complex and volatile market sector.

Before you consider Johnson & Johnson, you’ll want to hear this.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Johnson & Johnson wasn’t on the list.

While Johnson & Johnson currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here