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Johnson & Johnson’s Consumer Healthcare Segment: 3Q16 Estimates

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Consumer Healthcare segment

Johnson & Johnson’s (JNJ) Consumer Healthcare segment includes baby care, oral care, skin care, over-the-counter products, women’s health, and wound care franchises. The segment is expected to have positive growth in operational revenues in 3Q16.

In April 2016, Johnson & Johnson announced the acquisition of NeoStrata to strengthen its skin care products portfolio. It also announced the acquisition of Vogue International in June 2016 to strengthen its hair care products portfolio. Both these transactions are expected to close in 3Q16.

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Baby care franchise

The baby care franchise contributes nearly 16% to the Consumer Healthcare segment. Baby care revenues are expected to fall due to the consumer shift to premium products.

Over-the-counter franchise

The over-the-counter franchise contributes ~29% to segment sales. The key products from this franchise include analgesics, allergy medications including Zyrtec, and respiratory products.

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Skin care franchise

The skin care franchise contributes ~25% to segment sales. Aveeno and Neutrogena products are expected to drive the revenues for this franchise in 3Q16.

Oral care franchise

The oral care franchise contributes ~11% to segment sales. Johnson & Johnson has added a few new products under the Listerine brand and has carried out several marketing campaigns, which will contribute to the growth of the franchise in 3Q16.

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Women’s health franchise

The women’s health franchise contributes ~9% to segment sales. New products are expected to drive the growth of this franchise in 3Q16. The currency devaluation in Venezuela will have a negative impact on the revenues for this franchise.

Wound care franchise

The wound care franchise contributes ~7.0% to segment sales. The revenues for this franchise are expected to remain flat for 3Q16.

To divest your risk, you can consider the Fidelity MSCI Health Care ETF (FHLC), which holds 10.1% of its portfolio in JNJ. FHLC also holds 2.8% of its total assets in Allergan (AGN), 3.2% in AbbVie (ABBV), and 3.3% in Gilead Sciences (GILD).

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