Johnson & Johnson stock skidded Tuesday despite beating Wall Street's first-quarter forecasts and hiking its sales guidance for the year.
The downbeat move for J&J shares, which slumped a fraction and closed at 153.64, comes alongside broader market malaise after economic data showed the early impact of President Donald Trump's tariffs. Gabelli Funds portfolio manager Jeff Jonas says Johnson & Johnson has less protection in Mexico and more exposure to China than many of its peers.
But the company is also conservative and is likely lobbying the government, he said in an email to Investor's Business Daily.
Brian Mulberry, client portfolio manager at Zacks Investment Management, says the notable piece of Johnson & Johnson's earnings is its sales guidance boost — up $1.8 billion at the midpoint following the takeover of Intra-Cellular Therapies — and its dividend increase.
"The real story here is the fact that JNJ is raising its dividend and its sales guidance in the face of the numerous headwinds this market is worried about," he said in an email. "That is flexing its balance sheet bicep, demonstrating that JNJ expects to outperform on execution and productivity, ignoring short term disruptions."
Johnson & Johnson Stock: Sales, Earnings Beat
Across all products, Johnson & Johnson's sales climbed 2.4% to $21.89 billion, beating analysts' call for $21.56 billion, according to FactSet. J&J also earned an adjusted $2.77 per share, up 2.2% and ahead of expectations for $2.58.
Edward Jones analyst John Boylan called out strength from cancer treatments Darzalex and Carvykti, and immunology drug Tremfaya. Shares of Legend Biotech, which is partnered with J&J on Carvykti, jumped 7% at the open. He also noted Remicade, another immunology drug, had better-than-expected sales despite facing generic competition.
Medtech sales were weaker than expected, however, up just 1.3% on an adjusted operational basis to $8.02 billion. The innovative medicines division generated $13.87 billion in sales, an increase of 4.4%.
Gabelli's Jonas noted the atrial fibrillation business is losing share of newer pulse field ablation technologies. Both are means of correcting abnormal heart rhythms. While J&J had a setback for its pulsed field ablation product, Varipulse, Boston Scientific has been gaining share.
Orthopedic sales were also weak, which could be telling for rivals Zimmer Biomet and Stryker.
J&J Raises Its Sales Outlook
The Dow Jones Industrial Average giant hiked its sales guidance for the year. J&J now expects $91 billion to $91.8 billion in sales, up $1.8 billion at the midpoint from its prior outlook. The company retained its earnings guidance for $10.50 to $10.70 per share, minus certain items.
Analysts projected profit of $10.46 per share and $90.27 billion in sales.
Gabelli's Jonas says guidance was right as expected — "higher revenue due to Intra-Cellular and better foreign exchange rates, but the same EPS due to dilution from the acquisition. I'm glad they could absorb the tariff impact, but that number was bigger than expected."
Edward Jones' Boylan also kept a positive view on Johnson & Johnson stock. He acknowledged the ongoing court cases tied to J&J's talc businesses has thrown some uncertainty into the mix. But "we continue to believe J&J's positive attributes, such as new products and pipeline, financial strength, and diverse operations are not reflected in the price of the shares."
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