Performance by business segment
Johnson & Johnson (JNJ) reported a rise of ~2.3% in its revenue on a constant currency basis in 4Q16 compared to 4Q15. The company reported 4Q16 revenue of $18.1 billion, missing analysts’ estimate of $18.3 billion.
Johnson & Johnson’s overall business is classified into three business segments: Pharmaceuticals, Consumer, and Medical Devices. At constant exchange rates, the company reported growth across all its segments in 4Q16.
Pharmaceutical segment’s revenue
The Pharmaceutical segment, which contributes nearly 45.5% of JNJ’s total revenue, reported revenue of $8.2 billion in 4Q16, a rise of 2.1% over 4Q15. This rise consisted of an operational rise of ~2.6% and a negative currency impact of ~0.5% in the quarter.
The segment’s operational performance was driven by its oncology and immunology franchises. Its performance was offset by competition for its hepatitis C products in its infectious disease franchise and lower Invega sales in US markets due to generic competition.
Excluding the impact of its hepatitis C sales and its acquisitions and divestitures, the Pharmaceutical segment reported a rise of 9.9% in worldwide sales.
Consumer segment’s revenue
The Consumer segment contributed nearly 19% of JNJ’s total 4Q16 revenue. It reported revenue of $3.4 billion in 4Q16, a rise of 3.4% compared to 4Q15. The rise consisted of an operational rise of 4.9%, offset by a negative currency impact of 1.5%. The segment’s operational performance was mainly driven by its over-the-counter products and beauty products.
Revenues from baby care products, oral care products, women’s health products, and wound care products offset the growth of this segment in the quarter. Excluding acquisitions and divestitures, the segment reported a rise of 7.6% in worldwide sales.
Medical Devices segment’s revenue
The Medical Devices segment contributed nearly 35.5% of JNJ’s total revenue, reporting revenue of $6.4 billion in 4Q16, a rise of 0.2% compared to 4Q15. The segment saw an operational rise of 0.6% and a negative currency impact of 0.4% in the quarter.
The Medical Devices segment reported a fall in revenue due to the impact of the divestiture of its Cordis business in 4Q15 as well as the divestiture of its ortho-clinical diagnostics franchise in mid-2014. The segment’s key growth drivers included the advanced surgery, vision care, and cardiovascular franchises, whose growth was substantially offset by lower sales in the orthopedics, surgery, and diabetes care franchises. On excluding the impact acquisitions and divestitures, the segment reported a rise of 4.7% in worldwide sales.
To divest risk, investors can consider ETFs such as the iShares S&P Global Healthcare ETF (IXJ), which holds 7.9% of its total assets in Johnson & Johnson, 5.0% in Pfizer (PFE), 4.3% in Merck & Co. (MRK), and 2.6% in Medtronic (MDT).