Johnson and Johnson (JNJ) handily beat Wall Street’s sales and earnings expectations in the third quarter. The largest publicly traded healthcare company in the world saw sales rise 5.1% to $18.47 billion in the period, better than the $18.38 billion analysts were expecting.
Excluding special items, third-quarter earnings per share came in at $1.50, an increase of 10.3% year-over-year and far better than the $1.45 in EPS that Wall Street expected.
J&J also raised its full-year EPS estimate from the $5.85 to $5.92 range to the $5.92 to $5.97 range, so Johnson & Johnson doesn’t see too many problems ahead of it, either.
However, JNJ stock still was down 1% in Monday morning trading.
J&J got a big boost from pharmaceutical sales in the third quarter (they grew by 26%), even though the strength of the U.S. dollar was working against it. But perhaps worrying investors was the fact that J and J’s new hepatitis C drug is selling less rapidly than expected.
The healthcare giant expected sales of Olysio — its Hepatitis C treatment that gained FDA approval last November — to be a strong and consistent contributor. But sales of Olysio are waning already, falling from $831 million in the second quarter to $796 million in the third quarter. Sovaldi, by Gilead Sciences (GILD), is stealing Olysio’s thunder, and Gilead recently gained approval to start selling a new hepatitis C treatment called Harvoni that’s cheaper than either its own Sovaldi or JNJ’s Olysio.
Nonetheless, there’s plenty to like if you’re a JNJ shareholder.
For one, you couldn’t have asked for a much better quarter, Olysio not withstanding. And as always, fluctuations in the U.S. dollar will happen — it just went against Johnson and Johnson this time around.
Meanwhile, JNJ still is a great income holding, too. JNJ didn’t make the list of the Top 10 Dow Dividend Stocks for October, the company usually is in the running and could make the list next month. It yields a 2.8% in dividends that easily tops the 10-year Treasury, and it has grown its dividend every year since 1963. To get on the list, though, JNJ might have to displace a rival or two — Merck (MRK), Procter & Gamble (PG) and Pfizer (PFE) are all blue-chip stocks that paid a higher dividend than JNJ to begin the month.
Even backing out the dividend, JNJ stock remains a great investor. Blue Chip Growth Editor Louis Navellier went so far as to call the stock an “obvious choice” last month.
Johnson and Johnson shares — along with the stock market itself — are down modestly since then, but given the strong earnings performance and guidance we saw from JNJ today, shares only look more attractive from here.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid.
