Covid vaccines took a major toll on two separate medical companies Tuesday as the shots took a bite out of Johnson & Johnson's fourth-quarter sales and Danaher's outlook. The news left JNJ stock flat and DHR stock tumbling.
For Johnson & Johnson, pharmaceutical sales accounted for roughly 56% of total revenue, but declined 7.4% on a strict, as-reported basis. Revenue from its mostly defunct Covid vaccine plummeted more than 57% to $689 million. All of those sales came from outside the U.S.
Lee Brown, global sector lead for health care at research firm Third Bridge, blamed the Covid shot for "effectively dragging down the entire segment's performance." Excluding the Covid vaccine, pharma sales fell just 1%, Johnson & Johnson said in a news release.
On the stock market today, JNJ stock closed flat at 168.31 while DHR stock lost 2% and ended the regular session at 271.58.
JNJ Stock: Standouts Among Pharma Sales
Overall, the fourth quarter came in mixed for health care giant Johnson & Johnson. Adjusted earnings beat forecasts at $2.35 per share, growing 10.3%. But sales slipped 4.4% to $23.71 billion. Analysts polled by FactSet expected $23.9 billion in sales.
Citeline analyst Zhyar Said was forgiving of the light fourth-quarter sales.
"Johnson & Johnson still managed to end the year with a growth of 1.3% in sales, finalizing at $94.9 billion which could have been even stronger in the scenario of a more favorable foreign exchange (rate)," he said in an email to Investor's Business Daily. Citeline is a research firm.
Third Bridge's Brown noted several standout performances from the pharma segment with strong sales from immunology drugs Stelara and Tremfya and cancer treatments Darzalex and Erleada. The latter two put up a respective 26.6% and 40.9% fourth-quarter sales growth.
Bullishly for JNJ stock, the company's consumer health segment generated stronger 1% growth on a reported basis. Medtech sales declined 1.2%.
For the year, J&J predicted adjusted profit of $10.45-$10.65 per share and $96.9 billion to $97.9 billion in sales. JNJ stock analysts called for earnings of $10.33 a share and $97.75 billion in sales.
Guidance Snags DHR Stock
Meanwhile, DHR stock toppled 2.7% near 269.40 on disappointing guidance due to light expectations for its Covid vaccine sales contribution.
At Danaher, the only surprise came in the form of guidance, analysts said. The medical giant calls for mid-single digit sales growth this year. Its base business will grow by a high-single digit percentage, the firm said in a news release.
Evercore ISI analyst Vijay Kumar says Danaher now expects a lower contribution from Covid vaccines this year than previously projected.
RBC Capital Markets analyst Conor McNamara called the full-year outlook "better than feared." For the current quarter, Danaher expects mid-single digit sales growth in total sales and for its base business. He noted the company also changed how it defines its base business. Beginning in the first quarter, it will exclude Covid testing, vaccines and therapeutics from its base business.
"While we view the fiscal year 2023 guidance as positive given fears of a bio-production slowdown, we think the first quarter guide and new revenue definition are likely to pressure shares this morning," he said in a note to clients.
He kept his outperform rating on DHR stock, however.
Overall, Danaher earned $2.87 per share, minus some items, on $8.37 billion in fourth-quarter sales. The company pre-announced fourth-quarter metrics earlier this month.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
