- Shares fall despite sales and earnings beat and raise
- Investors see outlook as overly cautious
- Company confident baby powder lawsuits near settlement
Despite beating analysts’ first quarter sales and earnings forecasts and raising full year earnings guidance, healthcare bellwether Johnson & Johnson (J&J:NYSE) saw its shares fall by as much as 3% on lowered medium-term sales guidance for its pharmaceutical business.
Excluding one-off charges related to baby powder lawsuits and the upcoming spin-off of the consumer health business, earnings per share grew 0.4% year-on-year to $2.68 on revenues of $24.75 billion which were 7% and 4.5% higher than Wall Street consensus forecasts respectively.
CAUTIOUS EARNINGS RAISE
The company raised its FY 23 earnings per share range from $10.45-$10.65 to $10.60-$10.70, while revenues are forecast to be $98.9 billion up from $97.9 billion.
Chief financial officer Joseph Wolk told CNBC: ‘First-quarter growth was much stronger than even fourth-quarter growth for all three business units, and our positions kind of change to responsibly optimistic at this point. We feel very good about 2023.’
Despite the upbeat outlook, analysts were disappointed the company didn’t raise earnings even more.
Edward Jones analyst John Boylan commented: ‘We view guidance as appropriately conservative as EPS outlook was not raised by as much as the earnings upside seen in the first quarter.’
Also weighing on sentiment was news the company was lowering its pharmaceutical division sales target for 2025 by 5% to $57 billion due to negative foreign exchange headwinds from the strong US dollar. J&J generates roughly half of its revenues outside the US.
The board approved a 5.3% increase in the quarterly dividend to $1.19 per share.
LAWSUITS AND CONSUMER HEALTH SPIN-OFF
The company made progress in relation to long-running legal allegations its baby powder and other products caused cancer after proposing to pay claimants around $9 billion.
Wolk said the company was confident claimants would approve the plan after some 60,000 had already committed to accepting its latest proposal.
No further guidance was provided on the timing of the company’s spin-off of consumer healthcare division via an initial public offering.
