Johnson & Johnson (JNJ) Q1 2024 earnings

Johnson & Johnson On Tuesday, it reported first-quarter adjusted earnings that beat Wall Street expectations as sales of its medical device business rose.

Meanwhile, the company's total revenue for the period was largely in line with estimates.

J&J's Medical Technology division provides devices for surgical, orthopedic and vision procedures. The company is benefiting from a rebound in demand for non-urgent surgeries among the elderly, who postponed such procedures during the Covid pandemic. This increasing demand has been observed by health insurance companies such as Humana, UnitedHealth Group and Elevance Health.

Joseph Wolk, J&J's chief financial officer, told CNBC's “Squawk Box” on Tuesday that consumers may be pulling back in other areas but “don't want to compromise when it comes to their health, their mobility and their ability to live a fulfilling life.” He added that the company witnessed high levels of measures after the pandemic, and “we have not seen any decline from that.”

However, the company's shares closed down more than 2% on Tuesday.

Here's what Johnson & Johnson reported for the first quarter compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG:

Earnings per share: $2.71 adjusted vs. $2.64 expected Revenue: $21.38 billion vs. $21.4 billion expected

Johnson & Johnson's financial results are a leading indicator for the broader health sector.

The company reported total sales of $21.38 billion for the first three months of 2024, up more than 2% from the same quarter in 2023.

The pharmaceutical giant had net income of $5.35 billion, or $2.20 per share, during the quarter. This compares to a net loss of $491 million, or 19 cents per share, in the same period a year earlier. At that time, Johnson & Johnson recorded costs associated with its children's talcum powder liabilities and its consumer health unit Kinview.

Excluding certain items for the first quarter of 2024, adjusted earnings per share were $2.71.

J&J also narrowed its full-year guidance for this year. The company now expects sales of between $88 billion and $88.4 billion. This compares to a previous forecast of $87.8 billion to $88.6 billion.

J&J expects adjusted earnings of $10.57 to $10.72 per share. This compares to previous guidance of $10.55 to $10.75 per share.

Separately, Johnson & Johnson said Tuesday it would increase its quarterly dividend to $1.24 per share, up 4.2% from $1.19 per share. She said this marks the sixty-second year in which the company has witnessed consecutive increases in profits. Dividends are paid on June 4.

These results come weeks after Johnson & Johnson acquired the heart device company for $13.1 billion Medical shock wave – Part of pushing it into the cardiovascular space. The deal will make Johnson & Johnson a leader in four fast-growing categories of cardiovascular technology, the companies said.

Johnson & Johnson expects the deal to close midyear, which will impact the company's full-year guidance, executives said during an earnings call Tuesday.

Johnson & Johnson has acquired two other heart device companies over the past two years, spending $16.6 billion to buy Abiomed and $400 million to acquire private company Laminar.

These deals are also aimed at strengthening Johnson & Johnson's medical devices business after the company's separation from its consumer health unit Kinview last year.

Johnson & Johnson's medical devices business generated sales of $7.82 billion during the first quarter, up more than 4% year over year. Wall Street was expecting revenue of $7.87 billion, according to estimates compiled by StreetAccount.

Johnson & Johnson said its acquisition of Abiomed fueled the year-on-year rise. Growth also came from electrophysiological products, which evaluate the heart's electrical system and help doctors understand the cause of irregular heartbeats, according to Johnson & Johnson.

Wound closure products and devices for the treatment of orthopedic injuries, or serious skeletal or muscular injuries, have also contributed.

But the unit's vision product sales, including contact lenses, fell 3.3% to $1.26 billion in the quarter. Wall Street had expected Vision sales of $1.33 billion.

During the call, Johnson & Johnson executives said that was primarily driven by “shrinkage” of U.S. distributor inventory in contact lenses. But they added that the company expects single-digit growth in visibility this year and is confident there will be a “huge improvement in the performance of this business” going forward.

Meanwhile, Johnson & Johnson reported pharmaceutical sales of $13.56 billion, representing nearly 1% year-over-year growth. Excluding sales of the unpopular Covid vaccine, the pharmaceutical division's revenue rose nearly 7%.

This was the fourth quarter without any U.S. sales of Johnson & Johnson's Covid vaccine, which generated $25 million in international revenue.

Analysts were expecting sales of $13.5 billion for the business, according to StreetAccount. The business, also known as “innovative medicine,” focuses on drug development in various disease areas.

The company said the growth was driven by sales of Darzalex, a biologic drug to treat multiple myeloma, and Erleada, a treatment for prostate cancer. Also contributing to the rise was Johnson & Johnson's Carvacity, a cell therapy approved to treat a certain type of leukemia, and other oncology treatments.

But first-quarter sales of the company's blockbuster drug Stelara, which is used to treat several chronic and potentially disabling conditions such as Crohn's disease, were relatively flat compared to the same period last year.

Stelara brought in $2.45 billion in sales for the quarter. Wall Street was expecting revenue of $2.61 billion.

Johnson & Johnson began losing patent protection for Stelara late last year, opening the door for cheaper biosimilar competitors to enter the market. But the company signed settlement agreements with Amgen and other drugmakers to delay the launch of some copycat versions of Stelara until 2025.

J&J's first-quarter results come amid investor concern about tens of thousands of lawsuits alleging the company's talc-based products were contaminated with the carcinogen asbestos and caused ovarian cancer and numerous deaths.

These products, which include J&J's namesake baby powder, are now under Kenvue. But Johnson & Johnson will assume all liabilities related to those that arise in the United States and Canada.

Notably, a federal judge ruled in March that Johnson & Johnson could object to scientific evidence linking its talc products to ovarian cancer, which could stall a 53,000-lawyer lawsuit in federal court.

Wolk on Tuesday called the ruling “a very important development” and said the evidence presented against Johnson & Johnson is “frivolous science.” But he noted that it is difficult to provide a timeline for when the company will reach a broad resolution to the ongoing litigation.

In January, Johnson & Johnson said it reached a tentative settlement to resolve an investigation by more than 40 states into allegations that the company misled patients about the safety of its talc-based products. Wolk told the Wall Street Journal at the time that the company would pay $700 million to settle the investigation.

Last year, Johnson & Johnson set aside about $400 million to settle consumer protection claims in the United States.

It is noteworthy that the settlement does not resolve the lawsuits, some of which are scheduled to go to trial this year.