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Analyzing Johnson & Johnson’s Business Segments

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Business segments

As we discussed earlier, Johnson & Johnson (JNJ) reported an increase of ~5.3% in revenues in constant currencies for 2Q16—compared to 2Q15. Johnson & Johnson’s overall business is classified into three business segments—Pharmaceuticals segment, Consumer segment, and Medical Devices segment. At constant exchange rates, the company reported growth across all of the segments.

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Performance of each segment

The Pharmaceuticals segment reported revenues of $8.7 billion for 2Q16—an increase of 8.9% over 2Q15. This consisted of an operational increase of ~9.7% which was partly offset by the negative currency impact of ~0.8% during 2Q16. The growth was impacted by lower sales of Hepatitis C products.

The Medical Devices segment reported revenues of $6.4 billion for 2Q16—an increase of 0.8% compared to 2Q15. There was an operational increase of 1.8% and a negative currency impact of 1% during 2Q16. The revenues have declined due to the divestiture of the Cordis business in 2015. The growth in the existing portfolio included increased revenues from orthopedics, surgery, and vision care, substantially offset by lower sales of cardiovascular and diabetes care.

The Consumer segment reported revenues of $3.4 billion for 2Q16—a decrease of 1.8% compared to 2Q15. The decrease in revenues consisted of an operational increase of 1.5%. It was more than offset by a negative currency impact of 3.3% during 2Q16. The operational performance was mainly driven by oral health products, over-the-counter products, and skin care products. The revenues from baby care products, women’s health products, and wound care products offset the growth of this segment during 2Q16.

Key drugs like Stelara compete with Abbott’s (ABT) Humira. Xarelto competes with Bristol-Myers Squibb (BMY) and Pfizer’s (PFE) Eliquis. Investors can consider ETFs like the iShare US Pharmaceuticals ETF (IHE). IHE holds ~10% of its total assets in Johnson & Johnson.

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