Income · Stocks to Consider and Updates

Johnson & Johnson Beats Expectations, Boosts Guidance

JNJ  Thanks in part to a robust performance in pharmaceuticals, Johnson & Johnson (NYSE: JNJ – $112.68) reported strong sales and earnings for the first quarter. The world’s largest maker of health care products said adjusted earnings settled at $1.68 per share vs. $1.56 in last year’s first period and three cents better than consensus estimates. Currency impacts took its toll on sales in the Consumer and Medical Devices segments, but both divisions showed small gains if foreign exchange effects are taken out. However, worldwide Pharmaceutical sales of $8.2 billion represented a solid rise of 5.9%, versus the prior year with an operational increase of 8.5% and a negative currency impact of 2.6%. Domestic drug sales rose 12.9% and international sales increased 2.6%, net of a negative currency impact of 6.0%. Strong growth in new entries, such as IMBRUVICA, an oral therapy approved for treating certain B-cell malignancies, a type of blood or lymph node cancer; XARELTO an anticoagulant; DARZALEX, used in the treatment of myeloma; and INVOKANA/ INVOKAMET, which is administered to patients with type-2 diabetes. Additional contributors were made by REMICDE and SIMPONI, biologics used to treat immune-mediated inflammatory diseases. 

The company also provided full-year guidance and now expects earnings for the year of $6.53 to $6.68 a share, up from previous guidance for $6.43 to $ 6.58 a share. J&J anticipates revenue of $71.2 billion to $71.9 billion, compared with previous guidance for $70.8 billion to $71.5 billion. The shares are trading at an all-time high, but valuations are not too far out of line at 17 times the new mean projections for 2016. The company has over $3.5 billion in cash on hand and bolt on acquisitions in the medical device space are possible. The high-quality shares are also yielding investors 2.7% at current levels and a dividend increase for the second quarter is likely. A core holding in a well-diversified income account is well warranted.


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