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Must-Read Notes on Johnson & Johnson’s 1Q17 Earnings

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Must-Read Notes on Johnson & Johnson’s 1Q17 Earnings PART 3 OF 7

Johnson & Johnson’s 1Q17 Segment-by-Segment Performance

Performance by segment

Johnson & Johnson (JNJ) reported a rise of ~2.0% in its revenue at constant currencies in 1Q17 compared to 1Q16. The company missed analysts’ consensus estimate.

JNJ’s overall business is classified into three segments: Pharmaceuticals, Consumer, and Medical Devices. At constant exchange rates, the company reported growth across all of its segments.

Johnson &amp; Johnson’s 1Q17 Segment-by-Segment Performance

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Revenues by segment

The Pharmaceuticals segment, which contributes nearly 46% of JNJ’s total revenue, reported revenue of $8.2 billion in 1Q17, a rise of 0.8% over 1Q16. This rise consisted of an operational rise of ~1.4% and a negative currency impact of ~-0.6% during the quarter.

The segment’s operational performance was driven by its oncology and immunology franchises, and it was offset by competition from other hepatitis C products in the infectious disease franchise and lower Invega sales in US markets due to generic competition.

The Consumer segment contributed nearly 18% of JNJ’s total 1Q17 revenue. The segment reported revenue of $3.2 billion in 1Q17, a rise of 1.0% over 1Q16. The rise consisted of an operational rise of 0.8% and a currency impact of 0.2% during 1Q17. 

The segment’s operational performance was mainly driven by over-the-counter products and beauty products. Revenues from the segment’s baby care, oral care, women’s health, and wound care products offset its growth during the quarter.

The Medical Devices segment contributed nearly 35% of JNJ’s total revenue in 1Q17, reporting revenue of $6.3 billion, a rise of 3.0% over 1Q16. The segment saw an operational rise of 3.4% and a currency impact of -0.4% during 1Q17. The Medical Devices segment reported a revenue rise due to its acquisition of Abbott Medical Optics, which completed on February 27, 2017.

The segment’s rise was partially impacted by JNJ’s divestiture of its Cordis business in 4Q15. Key growth drivers included the advanced surgery, vision care, and cardiovascular franchises, substantially offset by lower sales in the orthopedics, surgery, and diabetes care franchises.

To divest risk, investors can consider ETFs such as the PowerShares Dynamic Pharmaceuticals ETF (PJP), which holds 5.1% of its total assets in Johnson & Johnson. PJP also holds 5.8% of its total assets in Eli Lilly and Company (LLY), 5.1% in Pfizer (PFE), and 5.1% in Merck & Co. (MRK).

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