Johnson & Johnson (JNJ) beat on fourth-quarter and full-year 2024 results, but its stock fell to $143 per share on Wednesday morning.
Revenue expectations during the earnings period beat Wall Street's expectations for revenue of $70 million and reported consistent EPS results based on estimated volume estimates, but highlighted in earnings expectations. had some negative impacts.
J&J reported total sales of $88.8 billion in 2024, an increase of 4.3% from 2023. This includes slowing sales of Covid-19-19 vaccines - a theme expected from other vaccine makers to see a slower respiratory virus season this year.
The company reported 2024 earnings of $5.79 per share, up 11% year over year.
Meanwhile, fourth-quarter revenue was mixed, with sales of $22 billion, up 5.3% year over year, and earnings per share down 17% from the prior year to $1.41.
However, the good news is somewhat tempered by the ongoing case of talc, which puts its growth potential seriously. Hearings on the Texas lawsuit will begin on February 18 and continue for a month thereafter.
“From there, the company expects plaintiffs’ attorneys to file an appeal (if positive) with the Fifth Circuit Court of Texas, which is considered likely to be more favorable to bankruptcy claims (with the attendant pre-packaged additional differential bankruptcy)," JPMorgan analysts wrote in a recent note to clients.
Ahead of earnings, analysts at American Securities lowered their 2025 price target for the company to $160 per share from $166 amid ongoing concerns over the TALC lawsuit.
In addition to the lawsuit, J&J also expects some negative impacts from foreign exchange during the year, as well as slower medical device sales, with China's procedural slowdown somewhat mitigating the company's potential revenue.
The company is shifting into a competitive market with the launch of a generic version of its blockbuster anti-inflammatory arthritis drug Stelara. Now, the drug also faces price pressure from newly negotiated prices with Medicare, one of its largest customer bases.
Meanwhile, its growth in the fourth quarter came from multiple myeloma drugs Darzalex and several cancer drugs. Total sales of the top six drugs were approximately $4.5 billion, accounting for approximately 20% of revenue in the quarter.
J&J announced it would acquire Insulin Pharmaceuticals for Mental Health Disorders (ITCI) in a $14.6 billion deal at the annual JPMorgan Healthcare conference earlier this month.
The company had $20 billion in cash flow throughout last year, an increase of $1.6 billion from 2023.
Inside the cells is a drug, Caplyta, that J&J hopes to exploit for newly recognized mental health conditions in the near future. But the company largely hopes the deal will be funded with debt.
"We plan to fund primarily through debt. We have no plans for near-term cost synergies. Instead, we expect to accelerate the penetration of Caplyta in existing markets, explore additional geographies to commercialize the portfolio, and potentially accelerate research and development to expand into Expand into the portfolio with new signs.
Experts believe that while Intracellular was a big deal and set the benchmark for biotech M&A this year, J&J didn't pass. In recent years, it has been slowly gaining access to smaller biotechs.
"The company has the ability to add either pharma or MedTech and has been very operational in both spaces over the past few years. Net debt is now about $1.2 billion, which will be paid out with FCF over the next few quarters. Development completed ," Mizuho healthcare expert Jared Holz wrote in a note to clients on Wednesday.
CEO Joaquin Duato dropped a lot of hints on the earnings call.
"External innovation has always been an important part of Johnson & Johnson's capital allocation strategy...In fact, we are not only one of the largest investors in mergers and acquisitions. We are always looking for opportunities to enhance our portfolio and pipeline."
J&J spends about 17% of its revenue on research and development, slightly lower than its peer group average of 19%, BOFA analysts said in a recent report.
Anjalee Kachmli is Yahoo Finance's Senior Health Reporter, covering all things pharmaceuticals, insurance, nursing services, digital health, PBMS, and health policy and politics. Of course, this includes GLP-1. Follow Anjalee X on social media platforms (Twitter), LinkedIn Bluesky @anjkhem.
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