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Behind JNJ’s Medical Devices Growth Trajectory

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Overview

In 1Q17, Johnson & Johnson’s (JNJ) Medical Device segment revenues came in at ~$6.3 billion, as compared to $6.1 billion in 1Q16. The Medical Device segment’s sales contributed ~35.4% to JNJ’s total revenues, and the company registered ~3% YoY (year-over-year) growth in this segment’s sales for the quarter.

In 4Q16, the segment reported ~0.2% YoY sales growth. Notably, JNJ started restructuring the segment in early 2016. For the company’s strategy for its Medical Device segment revival, check out Market Realist’s “How Johnson & Johnson Hopes to Boost Its Medical Device Segment.”

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Segment sales

In its Hospital Medical Devices business, Johnson & Johnson (JNJ) reported operational growth of ~6.5%. Its Consumer Medical Device business registered weak operational sales amid continued weakness in its Diabetes business, distribution issues in China, and inventory destocking issues.

The total segment’s underlying operational sales growth came in at ~3.4% in 1Q17. Sales growth in the US came in at around 2.2%, while international sales rose 4.7%. Medical Device sales in 1Q17 also include around $124 million of one-month sales from the Abbott Medical Optics business, which JNJ acquired in February 2017.

Recent acquisitions and restructuring initiatives in 1Q17

JNJ recently completed the acquisition of Abbott Medical Optics in 1Q17 for ~$4.3 billion. Abbott Medical Optics, a wholly owned subsidiary of Abbott Laboratories, has a leading position around the globe in ophthalmic surgery.

Some of the other recent acquisitions include Megadyne Medical Products in the electrosurgery domain, Torax Medical, which manufactures the LINX reflux management system, and Neuravi Limited, which develops devices for neuro-interventional therapy.

Competitors and ETFs

Among Johnson & Johnson’s major competitors in the medical device industry, Stryker (SYK), Medtronic (MDT), and Thermo Fisher Scientific (TMO) are expected to report sales growths of 16.3%, 3.9%, and 8.9%, respectively, in their most recent quarters.

Notably, investors interested in gaining exposure to JNJ can consider investing in ETFs like the iShares Core S&P 500 ETF (IVV). IVV invests ~1.64% of its total holdings in Johnson & Johnson.

Now let’s discuss the Medical Device segment’s key growth factors in 1Q17.

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