J&J beats earnings estimates; Middle East conflict weighs on medical device sales

Johnson & Johnson ‌reported ​a slightly higher-than-expected profit on Tuesday, driven by strong sales of immune disease treatment Tremfya, but geopolitical issues including the Middle East conflict were a drag on its medical ‌devices business.

The company posted third-quarter revenue of $25.4 billion, above analysts' average estimate of $25.28 billion, according to LSEG data. Adjusted earnings of $2.59 per share also topped Wall Street expectations of $2.54. Pharmaceutical sales jumped 7.7% in the quarter to $16.76 billion. Medical technology division sales ‌rose only 2.5% to $8.6 billion overall. Outside the US, sales in the division were basically flat.

J&J Chief Financial ‌Officer Joe Wolk, in an interview, said the Mideast conflict, austerity measures in Europe and pricing in China continued to weigh on results internationally, "but maybe in a little bit more pronounced way." He said the Mideast conflict, which has led to soaring fuel costs at home and abroad, ⁠has yet ​to impact the company's ⁠costs, but has hurt sales in the region.

"These are countries that still value and actually want premium healthcare systems, think Kuwait, UAE, Saudi Arabia. They ⁠pride themselves on having solid healthcare, very good healthcare," Wolk said. "But their budgets now are being resourced and allocated towards defense." Sales at ​its Abiomed heart pump business also remained slow after a UK study earlier this year raised questions ⁠about the use of Impella pumps during certain high-risk coronary procedures.

Tremfya sales rose 68% to $2.4 billion, exceeding analyst estimates of about $2.19 billion, while sales of ⁠Stelara, ​which is facing generic competition, fell 54% to $716 million, still well above Wall Street expectations of $591 million. Tremfya has increasingly replaced lost Stelara revenue following recent approvals in inflammatory bowel diseases. Sales of blood cancer treatment Darzalex rose about ⁠16% to $4.24 billion, short of analyst expectations of $4.4 billion.

The company raised its full-year forecast for reported sales to about $101.2 ⁠billion at the midpoint, from $101.1 ⁠billion previously. It increased its adjusted earnings forecast range with a new midpoint of $11.10 per share, up from $11.04. J&J shares closed at $263.73 on Monday. They have risen 27% this year, ‌outperforming both the ‌broader market and most healthcare peers.