Johnson & Johnson (JNJ) issued relatively uneventful first-quarter results Tuesday. We don’t expect to make a change to our fair value estimate, and we continue to like the company as a holding in the portfolio of our Dividend Growth Newsletter.
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First-quarter revenue was roughly flat from the same period a year ago, as domestic sales declines and a negative currency impact more than offset international strength. Net earnings in the quarter were also less-than-compelling with earnings per share advancing a meager 1.5%, to $1.37. However, J&J did update its earnings guidance for the full year to as much as $5.17 per share at the high end of the range, but most of the revision was driven by non-operational currency impacts.
We were somewhat disappointed in the performance of the company’s consumer division, which experienced declines on a global scale (both domestically and internationally). The firm continues to feel the pain in the suspension of its manufacturing facilities at McNeil, and strength in its Neutrogena skin care products did little to mitigate the overall business decline.
Pharmaceutical sales did little to impress, as well, with global revenue in that segment advancing a modest 1.2% versus the prior-year quarter. However, international sales advanced 16.5% in this segment, offsetting a 10.8% decline in revenue on the domestic front. The firm noted particular strength in international markets from Remicade (which treats a number of immune-mediated, inflammatory diseases) and Velcade (which treats multiple myeloma). Zytiga (which treats metastatic prostate cancer), Stelara (which treats plaque psoriasis) and Incivo (which treats chronic hepatitis C virus) were other strong performers in J&J’s pharma segment during the period.
Revenue in the company’s medical devices segment was roughly flat, though in this case, domestic sales offset declines in international sales. The biggest cause for the lack of growth in this segment was the firm’s decision to exit the drug-eluting stent market in the middle of last year.
All things considered, we’re more fans of J&J’s dividend growth prospects at this time than anything else. And while we were not pleased with the firm’s quarterly performance, we still think it is a strong holding in the portfolio of our Dividend Growth Newsletter.