J&J sees sales and earnings growth diluted by dollar strength

Johnson & Johnson lowered its profit and revenue forecast for the year as the strengthening dollar hit its heavy international sales mix.

Adjusted earnings for 2022 will be $10 to $10.10 per share, New Brunswick-based health care conglomerate New Jersey said in a statement Tuesday, down from a prior range of $10.15. at $10.35 per share.

Quarterly sales of branded drugs and the company’s Covid-19 vaccine both exceeded expectations.

This was the second cut to J&J’s forecast this year due to broader economic forces.

The dollar appreciated amid speculation that the Federal Reserve will raise interest rates further this summer in an attempt to curb inflation as the euro recently fell to near parity with the US currency.

The currency impact was greatest in Europe, where it reduced quarterly sales growth by nearly two-thirds to 7.3%.

As rising supply and labor costs stabilize, “inflationary pressures are here to stay,” said Joseph Wolk, chief financial officer of J&J.

“We had a sound assumption with inflation going into the year,” he said on a call with investors and analysts. “Some of that will play into next year’s thinking.”

The title changed little at 11:14 a.m. in New York. Through Monday’s close, it had gained 1.9% year-to-date.

Quarterly adjusted earnings were $2.59 per share, beating Wall Street’s average expectation of $2.55, while sales hit the average target of $24 billion.

The performance “underscores the underlying strength of its products, its diverse business platform and strong management execution,” Cantor Fitzgerald analyst Louise Chen said in a note.

The pharmaceuticals unit was the highlight, with drug sales rising 6.7% to $13.3 billion, driven by cancer and immunology therapies and the Covid vaccine.

The shooting generated $544 million, more than double the average analyst estimate, with the vast majority of revenue coming from outside the United States.

After suspending sales forecasts for its nonprofit Covid vaccine last quarter, new J&J CEO Joaquin Duato said in an April interview that the company would continue production “as long as the vaccine is needed.”

The company is looking to “adapt manufacturing and R&D efforts” to account for the oversupply of coronavirus vaccines, particularly in low- and middle-income countries, which have been major purchasers of the J&J vaccine, a said Wolk in an interview on Tuesday. .

Asked if J&J will eventually stop production of Covid vaccines, Wolk said: “Hopefully for all of us that we can do that.” J&J aims to focus on its oncology and immunology portfolios, he said.

Meanwhile, J&J’s medical technology sales fell 1.1% to $6.9 billion, missing the $7.1 billion estimate.

The device unit faced headwinds in China, Wolk said, where a Covid outbreak had led to a 25% to 30% reduction in procedures compared to before the pandemic.

Still, he said, the number of surgeries in China improved in June and the second half looks stronger.

“The Covid dynamic is a risk that continues to exist, but we are not dependent on one platform or one market,” he said.

J&J is also making progress on the spin-out of its consumer health unit, which is still expected next year, Wolk said.

The division’s sales fell 1.3% to $3.8 billion, still slightly above average.

Wolk said the unit will benefit from inflation-linked price increases in the second half of the year.

He added that the separation would not be affected by macroeconomic trends.

J&J aims to announce the name and headquarters of the new consumer company this quarter, Wolk said, and will disclose the financial vehicle for the separation before the end of the year.

Among the options is an initial public offering, he said on Bloomberg Television.