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Johnson & Johnson’s 1Q15 Earnings: Changes in Growth Rate

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Johnson & Johnson’s growth rate

As discussed earlier, Johnson & Johnson (JNJ) reported a rise of ~3.9% in revenue in constant currencies for 1Q16 compared to 1Q15. The company’s 1Q16 revenue was $17.48 billion, at par with analysts’ consensus estimate of $17.49 billion.

The above graph shows that foreign exchange rates had a constant negative impact on the growth rate of Johnson & Johnson in each quarter. This was mainly because nearly 48% of JNJ’s total revenue was reported from sales outside the United States.

The company operates over 134 manufacturing facilities and eight innovation and research centers worldwide.

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1Q16 performance

Johnson & Johnson reported operational growth of 3.9% during 1Q16. Negative currency headwinds impacted this growth by 3.3% during the quarter, and the company reported growth of 0.6%, including the impact of foreign exchange.

As JNJ’s business from Venezuela makes up less than 1% of its total sales, the currency devaluation in Venezuela had some impact on JNJ’s growth.

Year-over-year performance

Johnson & Johnson’s revenue has risen over the past few years following the restructuring of its business segments and the strong performances of a few of its key products, including Xarelto, Zytiga, Remicade, Stelara, and Olysio. JNJ’s 2016 revenue is estimated to rise by 2.4% to $71.7 billion compared to a fall of 5.7% in 2015.

Segment-by-segment revenues and the performances of blockbuster drugs during 1Q16 will be discussed in the coming articles. Key drugs such as Stelara compete with Amgen (AMGN) and Pfizer’s (PFE) Enbrel and Abbott Laboratories’ (ABT) Humira. Zytiga competes with Dendreon’s (DNDN) Provenge.

Investors can consider ETFs such as the iShares US Pharmaceuticals ETF (IHE), which holds 9.3% of its total assets in Johnson & Johnson, or the Fidelity MSCI Healthcare Index ETF (FHLC), which holds 8.8% of its total assets in Johnson & Johnson, in order to divest risk.

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