Johnson & Johnson‘s (JNJ) Covid vaccine brought in strong second-quarter sales, but JNJ stock has crumbled since its earnings report.
The health care bellwether topped Wall Street’s quarterly expectations with drug sales leading the way. The pharmaceuticals division generated more than 55% of total sales and grew nearly 7% on a strict, as-reported basis. That helped offset overall weakness from a strong U.S. dollar. Notably, the company’s one-shot Covid vaccine brought in nearly double what analysts projected.
But sales from the company’s consumer health and medtech divisions each fell roughly 1%.
Meanwhile, Johnson & Johnson continues to highlight its cancer treatments. The company recently said more than three-quarters of patients with an aggressive form of multiple myeloma responded to a combination approach in Phase 1 testing. Further, three years of treatment with Imbruvica led to “deep and durable” responses in leukemia patients.
J&J is working to separate its consumer health division and has entered into a series of settlements for its part in the opioid crisis.
The Dow Jones stalwart now expects $93.3 billion to $94.3 billion in full-year sales.
So, all things considered, is JNJ stock now a sell?
JNJ Stock: Earnings, Sales Beat
During the second quarter, Johnson & Johnson earned $2.59 per share on $24.02 billion in sales. Both metrics beat analysts’ forecasts, but grew minimally. Earnings rose 4% while sales climbed 3%.
J&J reported strong growth from psoriasis treatment Stelara and cancer drug Darzalex, up a respective 14% and 39% vs. the year-earlier period. Prostate cancer treatment Erleada and schizophrenia medicine Invega are also gaining share.
But medtech and consumer health sales fell. Advanced surgery sales were light, analysts said.
But medical device sales were a bright spot. Orthopedic, surgical and vision sales all climbed higher.
In the current quarter, JNJ stock analysts forecast adjusted earnings of $2.53 per share on $23.5 billion in sales. Earnings would fall 7 cents vs. the same quarter last year. Sales would be about flat.
JNJ stock didn’t meet the bar for CAN SLIM investors in the second quarter, and isn’t expected to do so in the third. Investors are encouraged to seek stocks with recent earnings and sales growth of 20%-25%.
Expectations For 2022
During its second-quarter report, Johnson & Johnson trimmed its full-year outlook for 2022. The firm expects adjusted earnings of $10.05 a share on sales of $93.8 billion. That’s based on the midpoint of its outlook.
For the year, JNJ stock analysts are looking for adjusted profit of $10.10 per share on $95.33 billion in sales. Both measures would climb less than 10% year over year.
Last year, Johnson & Johnson brought in $93.78 billion in sales, popping nearly 14%. The company also reported adjusted profit of $9.80 per share, surging 22%.
Johnson & Johnson Technical Analysis
Shares of J&J have an Investor’s Business Daily Composite Rating of 81 out of a best-possible 99. The CR scores a stock’s key growth metrics against all other stocks regardless of industry group. So in terms of key growth measures, JNJ stock outranks 81% of all stocks.
(Related: Does your favorite stock get a pass or fail rating from IBD Digital?)
J&J stock has an IBD Relative Strength Rating of 68. The RS Rating measures a stock’s 12-month performance on a 1-99 scale against all other stocks. Most big winners have an RS Rating of 80 or higher before they break out on major price runs. This puts J&J shares below the leading stocks.
Legal Settlements Abound
Johnson & Johnson is now emerging from under a cloud of litigation.
Earlier this year, the company agreed to pay $5 billion to settle claims it contributed to the opioid crisis in the U.S. Drug distributors AmerisourceBergen (ABC), Cardinal Health (CAH) and McKesson (MCK) will pay $21 billion.
Further, Johnson & Johnson added another $99 million settlement in West Virginia in April.
J&J also recently spun out its talcum powder business following claims its compound led people to develop cancer. Then, the new company immediately filed for bankruptcy. Before that, J&J pulled its baby powder brand from shelves in the U.S. and Canada.
In other news, the company is separating its consumer health division into a new company. This will allow J&J to focus on high-growth products, including its drugs and medical devices. In 2021, those units generated more than $79 billion in sales.
JNJ Stock News: New Cancer Data
Recently, Johnson & Johnson said it added a new drug, dubbed teclistamab, to its approved medicine Darzalex Faspro in patients with aggressive multiple myeloma, a blood cancer. At a median follow-up of 8.6 months, 76.5% of patients who could be evaluated had responded to the treatment.
The company also said three years of treatment with its approved drug, Imbruvica, resulted in “deep and durable” responses for patients with lymphocytic leukemia. Imbruvica helped lengthen the amount of time before patients’ cancer worsened and improved overall survival.
But initial results from a midstage study of its drug, Balversa, in patients with solid tumors were mixed. J&J tested the treatment in patients with a specific genetic mutation behind their cancer, regardless of cancer type or location. Overall, 29.2% of patients responded, meaning their tumors shrank. But 72.5% of patients were deemed to have their cancer under control.
Is JNJ Stock A Sell?
Johnson & Johnson stock wasn’t a buy on Aug. 9. By at least one measure, it could be a sell. Shares have toppled below their 50-day and 200-day moving averages. Institutional investors use these levels to help determine when to sell.
The company’s fundamentals are improving, and litigation risk is starting to lessen.
Still, JNJ stock analysts don’t expect sales growth to meet CAN SLIM marks in the third quarter. But big players like Johnson & Johnson can still rise without adding massive gains.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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