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J&J's Medical Tech Woes Mask Growth
17 Oct
Summary
- Johnson & Johnson beat Q3 revenue and earnings expectations.
- Medical device sales disappointed, causing investor concern.
- The company is projected to become a major cancer drug provider by 2030.
Johnson & Johnson reported third-quarter revenue of $25.9 billion and adjusted earnings per share of $2.59, surpassing analyst expectations. The company also increased its full-year sales and earnings guidance for fiscal 2026.
However, the medical technology segment's revenue grew by only 2.5% to $8.6 billion, failing to meet consensus estimates. This shortfall, coupled with CFO Joe Wolk's admission of disappointing performance, led to a nearly 6% stock decline.
Despite these concerns, the medical technology division represents only about one-third of J&J's total sales and less than 20% of its adjusted net income. The company remains on track to become a significant player in cancer treatments by 2030, with projected oncology drug business reaching at least $50 billion.
Key oncology drugs like Darzalex, Rybrevant, and Tecvayli are already demonstrating strong sales growth. The company's global oncology business saw a more than 16% increase to $7.6 billion in Q3 alone. Recent FDA priority review for Rybrevant Faspro further supports its oncology ambitions.
Adding stability is J&J's consistent dividend, boasting a 64-year growth streak, supported by strong anticipated profits. Analysts maintain a positive outlook, with most rating J&J as a strong buy and setting a consensus price target of $282.48.
