In a reversal from last quarter, Johnson & Johnson's (JNJ, Financial) Innovative Medicine segment, previously known as Pharma, outperformed the MedTech segment. This was mainly due to the strong performance of its oncology portfolio, helping the healthcare giant surpass Q2 EPS estimates. However, JNJ reduced its FY24 EPS guidance to $9.97-10.07 from $10.57-10.72, reflecting the impact of acquisitions, most notably its $13.0 billion acquisition of Shockwave Medical on April 5.
Since the guidance cut wasn't related to JNJ's operational results, investors are largely overlooking the downgraded EPS outlook. Expectations were muted heading into the earnings report, as reflected in the stock's recent lackluster performance. Therefore, the fact that JNJ topped EPS expectations while reaffirming its FY24 revenue guidance of $88.0-$88.4 billion is being viewed positively.
Overall, JNJ's Q2 results were mixed, with the MedTech segment showing disappointing growth.
- MedTech revenue increased by just 2.2% to $7.9 billion, falling short of analysts' expectations. The segment was weighed down by a 4.1% decline in surgical device sales due to ongoing supply chain issues, competitive pressures, and slowing demand for bariatric procedures.
- On a positive note, revenue in MedTech's Cardiovascular business surged nearly 16% to $1.87 billion, driven by Abiomed, the maker of heart pump products that JNJ acquired in 2022.
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In the Innovative Medicine segment, revenue rose by 5.5% to $14.5 billion, up from last quarter's growth of just 1%, primarily driven by JNJ's oncology portfolio.
- Blood cancer drug Darzalex was a standout, with sales climbing 18% to $2.88 billion, helping offset the impact of slowing sales of psoriasis drug Stelara (+3%), which will face strong competition next year.
The main takeaway is that while JNJ didn't excel in Q2 results and guidance, the company is showing strength in key areas like oncology and cardiovascular businesses.
