Johnson & Johnson (JNJ) has built one of the most comprehensive health care businesses, generating approximately 70% of revenue from top positions in its respective markets. The firm is focused on innovation while broadening its geographic presence, and it benefits from one of the best pharmaceutical portfolios on the market today. All of this was on display when J&J reported better than-expected second-quarter results Tuesday.
Sales during the period advanced more than 9% thanks to a near-15% increase in domestic revenue. Excluding one-time items, net earnings for the quarter came in at $4.8 billion, equivalent to $1.66 per share – up 11.3% and 12.2% respectively, as compared to the same period in 2013. Leading the charge was the company’s pharmaceutical portfolio, which jumped more than 20% versus the previous year (up more than 36% domestically):
The strong sales results were primarily driven by new products including OLYSIO®/SOVRIAD® (simeprevir), for combination treatment of chronic hepatitis C in adult patients; XARELTO® (rivaroxaban), an oral anticoagulant; ZYTIGA® (abiraterone acetate), an oral, once-daily medication for use in combination with prednisone for the treatment of metastatic, castration-resistant prostate cancer; INVOKANA® (canagliflozin), for the treatment of adults with type 2 diabetes; and IMBRUVICA® (ibrutinib), a kinase inhibitor for the treatment of mantle cell lymphoma and chronic lymphocytic leukemia in patients who have had at least one prior therapy.
Additional contributors to operational sales growth were STELARA® (ustekinumab), a biologic approved for the treatment of moderate to severe plaque psoriasis and psoriatic arthritis; REMICADE® (infliximab) and SIMPONI®/SIMPONI® ARIA™ (golimumab), biologics approved for the treatment of a number of immune-mediated inflammatory diseases; INVEGA® SUSTENNA®/XEPLION® (paliperidone palmitate), a once-monthly, long-acting, injectable atypical antipsychotic for the treatment of schizophrenia in adults; and PREZISTA® (darunavir), a treatment for HIV.
Johnson & Johnson’s consumer business advanced 2.4% versus the prior year, and the company’s medical devices and diagnostic segment’s revenue increased marginally on a year-over-year basis. Consolidated top-line growth and profit expansion during the period were very nice, prompting J&J to raise its earnings guidance for full-year 2014 to the range of $5.85-$5.92 per share (was $5.80-$5.90).
Valuentum’s Take
It’s hard not to like J&J. The company’s dividend track record is impressive (it yields ~2.7%), and we’re expecting strong dividend growth for many years to come (its Dividend Cushion ratio is 2.3). Our fair value estimate of the health care giant is $107 per share, slightly higher than where shares are trading at the time of this writing. We don’t expect to make any changes to its weighting in the Dividend Growth portfolio in light of the most recently-reported results. To access J&J’s landing page, please click here.