- Johnson & Johnson reported a solid set of financial results, in a difficult and challenging macroeconomic environment, and has given positive guidance for 2023, reflecting the ability of management to deal with the prevailing challenges.
- Fourth quarter adjusted earnings per share came in at $2.35, and were up by 10.3% y/y, which was $0.11 above market consensus. However, revenue declined by 4.4% primarily due to lower demand for Covid vaccines.
The Medtech operations saw a recovery in surgical procedures globally, following the end of the Covid pandemic lockdowns. However, the Pharma segment, which accounts for 50% – 55% of the group operations, reported a sales decline (off a high base) as a result of flagging vaccine sales. The diversified portfolio of other patented drugs such as blood thinners, cancer drugs, and cardiovascular pharmaceuticals reflected positive results. - J&J was founded in 1886, and is now a giant multinational diversified healthcare company, encompassing Pharmaceutical, MedTech devices, and Consumer Health businesses.
- J&J is looking to spin-off its lower margin consumer health division, with contains predominantly over-the-counter products, into a separate listed company, so it can focus on higher margin businesses.
The company believes that the benefit of changing the long established business model is the way forward. It will move away from an overcrowded consumer health market and focus on drug research and surgical implants which should yield better returns for the group. - Guidance for 2023 indicates adjusted EPS of between $10.45 and $10.65 on the back of the reopening of the Chinese markets.
- The high quality of the business and the resilience of the business model, with decades of rising dividend payments, makes this a defensive and relatively safe bet. J&J is also a component of the Dow Jones and S&P500 indices. I am a patient long term investor in J&J shares in my offshore managed portfolios.
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