According to KB Securities, Johnson & Johnson surpassed market expectations with its third-quarter earnings. The company reported revenue of $22.5 billion, a 5.2% year-over-year increase. Although earnings per share (EPS) fell 9% to $2.42, both revenue and EPS exceeded market expectations by 1.3% and 9.7%, respectively.
The pharmaceutical division led the growth, increasing 6.3% year-over-year, driven by strong sales of key drugs like Darzalex and Erleada. Johnson & Johnson’s MedTech segment also grew 6.4%, fueled by rising demand for cardiovascular products and surgical equipment. Despite these gains, the company’s operating profit margin dipped to 28.9%, partly due to its acquisition of heart failure treatment device maker V-Wave for $1.7 billion.
Looking ahead, Johnson & Johnson raised its guidance for 2024, projecting adjusted revenue growth of 5.7% to 6.2%, up from its previous estimate. The company now expects annual revenue to be between $89.4 billion and $89.8 billion, up from the previous range of $88.0 billion to $88.4 billion. However, its adjusted EPS forecast was revised downward from $9.86 to $9.96, reflecting the impact of acquisitions.
Johnson & Johnson’s recent acquisitions and advancements in its product pipeline are contributing to its growth. The company recently launched the Bellis Spine Robot and Bolt Coating System in the U.S. market. It has over 101 ongoing projects in its R&D pipeline and invests more than 15% of its revenue in research and development.
Yoo Jung Ho, a researcher at KB Securities, noted that Johnson & Johnson’s steady growth in high-margin businesses and its strategic acquisitions are expected to drive long-term performance and high dividends. The company’s 12-month trailing return on equity (ROE) stands at 32.3%, supported by strong shareholder returns, including $3 billion in dividends and share buybacks.
At a 12-month trailing price-to-earnings (P/E) ratio of 15.7, Johnson & Johnson is valued lower than both the market average of 21.9 and the industry average of 19.2. Yoo concluded that Johnson & Johnson’s focus on building a high-margin portfolio and its low volatility make the company an appealing investment opportunity.
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