Johnson & Johnson Expected to Post a Q1 Earnings Decline

A sign is posted at the Johnson & Johnson campus on August 26, 2019 in Irvine, California.
Mario Tama / Getty Images.

With the talc legal issue nearly settled and strong cancer drug sales, Johnson & Johnson (JNJ) is expected to see brighter days ahead after a first-quarter dip.

Key Takeaways

  • Analysts expect earnings per share (EPS) of $2.51 on revenue of $23.6 billion.
  • Johnson & Johnson could see continued pressure from currency rates and vaccine sales.
  • The company announced an eight-fold settlement increase in its long-running baby talc litigation.

According to Visible Alpha, analysts expect earnings per share to come in at $2.51 on revenue of $23.6 billion, according to Visible Alpha. That would represent a 6.4% decline in earnings per share. In its previous earnings report, a fourth-quarter sales decline of 4.4% was attributed to adverse currency exchange moves and lower COVID-19 vaccine sales.

JNJ will report earnings on Tuesday.

The consumer staple giant enters this earnings season with its shares on the rise after more clarity on the long-running legal case over its baby talcum powder product. J&J’s subsidiary LTL Management had revised its outlook for the settlement to $8.9 billion, payable over a 25-year period.The subsidiary was set up to manage litigation and immediately filed for Chapter 11 bankruptcy protection.

However, the company’s board met in early April and approved the latest settlement, which is more than eight times the previous offer to the more than 60,000 claimants. This ends some of the uncertainty plaguing investors who can now turn their focus to the company's business operations in the coming earnings release. 

In a commentary accompanying its previous earnings report, JNJ Chairman and CEO Joaquin Duato said the company’s three business segments—consumer health, pharmaceutical, and MedTech—were in a good position to weather macroeconomic headwinds that are likely to persist in the short-term.

J&J's worldwide sales were 1.3% higher in 2022, but that was after a 7.4% drop in the pharmaceutical segment, which is the largest of the three business segments. Foreign exchange rates were the key problem for this segment and dollar-led pressures are likely to persist.

The company continued to see market share gains for some of its drugs, including cancer treatment Darzalex and its prostate cancer treatment ERLEADA, which helped to offset a decline in immunosuppressant Remicade's sales. Top-line growth boosts could come soon from the acquisition of heart pump manufacturer Abiomed last year, and the FDA approval of Johnson & Johnson's TELIGEN system which brings "first-of-its-kind technology" to spinal surgeons.

Johnson & Johnson shares were trading at $165.72 on Friday, down about 6.5% for the year. In the contrast, the S&P Global Healthcare index was down 1.51% but had mounted a 3.37% rally to start the current quarter. J&J may have room to catch up to the broader index now that doubts over the talc settlement liability have been removed.

1-year chart of J&J price


Article Sources
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  1. J&J. "Q1 23 Earnings Call".

  2. Visible Alpha. "Financial Data".

  3. FT. "J&J Agrees to Pay $8.9bn Talc Claims."

  4. Johnson & Johnson. "Johnson & Johnson Subsidiary LTL Management LLC (“LTL”) Re-Files for Voluntary Chapter 11 to Equitably Resolve All Current and Future Talc Claims."

  5. J&J. "Full Year 2022 Earnings Results."

  6. J&J. "TELIGEN Press Release."

  7. S&P. "S&P 500 Global Healthcare Index".

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