Healthcare Giant J&J Outperforms Market Predictions in Q1

Johnson & Johnson’s (J&J) first-quarter net profit exceeded market consensus.

J&J’s first-quarter revenue was $21.38 billion, a 2.3% increase from the previous year, slightly lower than market expectations. However, earnings per share rose 12% to $2.71, surpassing market forecasts.

The pharmaceutical business, including the anticancer drugs Darzalex and Erleada, led revenue growth, while the medical technology business saw growth driven by cardiovascular-related devices. Thanks to the resolution of supply chain delays and organizational restructuring, the gross profit margin increased by 2.83% to 74.7% compared to the previous year, while the operating profit margin increased by 0.69% to 33.8%.

Along with this, J&J projected a 5.5 – 6% increase in revenue and approximately 7.7% increase in earnings per share for 2024 compared to the previous year. The company focuses on securing technology through acquisitions and expanding pharmaceuticals with the funds secured from business spin-offs. Recently, it acquired Shockwave Medical, a medical company with intravascular lithotripsy (IVL) technology, for $13.1 billion, and at the beginning of the year, it acquired Ambrx Biopharma, a cancer technology company.

The company also announced a strategy to achieve $25 billion in sales with a multiple myeloma treatment. In the long term, to prepare for the expiration of pharmaceutical patents, it plans to secure a pipeline of more than 10 new drugs with sales of up to $5 billion and more than 15 new drugs with sales of over $1 billion between 2025 and 2030, including Talvey and Tecvayli.

Yu Jung Ho, a researcher at KB Securities, predicted, “J&J’s profit growth through the expansion of high-margin businesses and pipeline is expected, and a stable stock price trend based on steady shareholder returns is anticipated.”

J&J’s 12-month leading return on equity (ROE) maintains a high level of 32.8% compared to the market. The company announced a 4.2% increase in quarterly dividends, continuing its 62-year tradition.

The 12-month leading price-earnings ratio (PER) is 13.5 times, lower than the market’s 20.0 times and the healthcare industry’s 18.5 times. Considering the steady dividends, low volatility, and the construction of a high-margin portfolio, it is judged that its relative investment attractiveness is high.