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Johnson & Johnson’s 2Q17 Performance, by Segment

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Aug. 29 2017, Updated 7:40 a.m. ET

Segment-wise performance

Johnson & Johnson (JNJ) reported 2.9% growth in operating revenue between 2Q16 and 2Q17. However, the company missed analysts’ 2Q17 estimate and reported revenue of $18.8 billion due to a 1% foreign exchange impact. Analysts had forecast revenue of $19 billion.

Johnson & Johnson’s business is broken down into the pharmaceuticals segment, consumer segment, and medical devices segment. At constant exchange rates, the company reported growth across all segments. The above chart shows its segment-wise revenue over the last few quarters.

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Revenue by segment

The pharmaceuticals segment reported revenue of $8.6 billion in 2Q17, a decrease of 0.2% from 2Q16. This figure includes an operational increase of ~1.0%, which was more than offset by a 1.2% foreign exchange impact. The growth in operating revenue was driven by the strong performance of Darzalex and Imbruvica in the oncology franchise, and partially offset by lower sales of major products in the immunology, infectious disease, neuroscience, and cardiovascular franchises.

The consumer segment reported revenue of $3.5 billion in 2Q17, 1.7% growth from 2Q16. The increase in revenue includes a 2.3% increase in operating revenues, which was partially offset by a 0.6% foreign exchange impact. The growth was driven by beauty products, over-the-counter products, and wound care products, and offset by lower sales of baby care products, oral care products, and women’s health products.

The medical devices segment reported revenue of $6.7 billion in 2Q17, 4.9% growth from 2Q16. This figure includes a 5.9% operating revenue increase, which was partially offset by a 1% foreign exchange impact. The growth was mainly due to the inclusion of revenue from Abbott Medical Optics, which was acquired by Johnson & Johnson in February 2017, and partially impacted by the divestiture of Cordis in 4Q15. The revenue growth was also driven by the advanced surgery, vision care, cardiovascular, and orthopedics franchises, and substantially offset by lower sales in the surgery and diabetes care franchises.

Excluding the effects of acquisitions and divestitures, the pharmaceutical segment reported growth of 0.5% in worldwide sales, the consumer segment reported a decrease of 0.8% in worldwide sales, and the medical devices segment reported growth of 1.1% in worldwide sales.

To divest company-specific risks, investors could consider the iShares US Pharmaceuticals ETF (IHE) which has a 10.3% exposure to Johnson & Johnson (JNJ). IHE also holds 5.8% of its total assets in Eli Lilly and Company (LLY), 5.7% in Allergan (AGN), and 2.7% in Mylan (MYL).

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