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Johnson & Johnson Stock Dips Despite Earnings Beat and Guidance Hike

j&j-stock-drops-despite-earnings-beat-and-guidance-hike

J&J’s Earnings Exceed Expectations

Johnson & Johnson (JNJ) saw its stock fall on Tuesday, despite surpassing Wall Street’s first-quarter earnings expectations and raising its sales guidance for the year. Shares closed at $153.64, down slightly from the previous session, reflecting broader market trends influenced by the economic impact of President Trump’s tariffs. Gabelli Funds’ Jeff Jonas highlighted J&J’s increased exposure to China and its limited protection in Mexico compared to its peers.

Increased Sales and Dividend Hike Highlight Strength

Despite the market’s reaction, J&J’s earnings report showed solid growth. The company reported $21.89 billion in sales, a 2.4% increase year-over-year, surpassing analysts’ expectations of $21.56 billion. Adjusted earnings per share rose 2.2% to $2.77, ahead of the anticipated $2.58. Additionally, the company raised its dividend, demonstrating confidence in its ability to weather market disruptions.

Strong Performance in Cancer and Immunology

Notable contributors to the strong earnings included J&J’s cancer treatments, Darzalex and Carvykti, as well as the immunology drug Tremfaya. These products helped drive growth, even as J&J’s Medtech sales fell short of expectations, rising only 1.3% to $8.02 billion. However, its innovative medicines division saw an increase of 4.4%, generating $13.87 billion in sales.

Weakness in Orthopedics and Medtech

On the downside, J&J’s orthopedic sales were weaker than expected, which could signal challenges for competitors like Zimmer Biomet and Stryker. Additionally, the company’s atrial fibrillation business faced competition from newer technologies, and J&J’s Varipulse, a pulse field ablation product, struggled against Boston Scientific’s offerings.

Raised Sales Outlook Amid Tariff Concerns

J&J raised its 2025 sales guidance to a range of $91 billion to $91.8 billion, up $1.8 billion from its previous forecast. However, it maintained its earnings guidance of $10.50 to $10.70 per share. Analysts had anticipated $10.46 per share and $90.27 billion in sales. Gabelli’s Jonas noted the increase in sales is partly due to the Intra-Cellular acquisition and favorable foreign exchange rates, but EPS remained flat due to dilution from the acquisition.

Continued Positivity Despite Legal Challenges

Edward Jones’ analyst, John Boylan, remains positive on J&J’s prospects despite the uncertainty caused by ongoing court cases related to the company’s talc business. Boylan emphasized that J&J’s strengths, including its new products, financial stability, and diverse operations, continue to provide long-term value, which may not yet be reflected in the stock price.

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