Johnson & Johnson Reveals Unexpected Spinoff Plans, Boosting S&P Stock Interest
Johnson & Johnson (JNJ) recently announced plans to spin off its orthopedics business, set to become a new company named DePuy Synthes. This decision aligns with the company’s stronger-than-expected third-quarter results and an upward adjustment in sales projections.
Details of the Spin-Off
The new entity, DePuy Synthes, will be the largest company focusing specifically on orthopedics within the industry. Last year, this division generated notable revenue of $9.2 billion. Following the separation, J&J will concentrate on various therapeutic areas, including:
- Oncology
- Immunology
- Neuroscience
- Cardiovascular
- Surgery
- Vision
The company expects the separation to be completed within 18 to 24 months. This strategic move could lead to an improvement in margins for Johnson & Johnson’s continuing operations, as stated by Brian Mulberry, a senior client portfolio manager at Zacks Investment Management.
Third-Quarter Financial Highlights
In its latest quarterly report, J&J surpassed earnings expectations, reporting adjusted earnings of $2.80 per share, compared to analyst projections of $2.76. Overall sales reached nearly $24 billion, exceeding the estimated $23.76 billion.
Earnings increased by approximately 16%, while sales grew around 7%. The company’s innovative medicines and medtech segments performed particularly well, both exceeding forecasts by around 1%.
Key Product Performance
Several products contributed to J&J’s strong financial performance:
- Immunology drug Stelara generated $1.6 billion but declined by 41% year over year due to biosimilar competition, despite beating forecasts by 5%.
- Tremfya reported $1.4 billion, a 41% increase, surpassing expectations by 8%.
- Cancer treatments Darzalex and Carvykti achieved $3.7 billion and $524 million, respectively, both exceeding forecasts.
- However, Rybrevant’s sales fell short, accounting for $198 million.
The medtech division contributed $8.4 billion in sales, reflecting a year-over-year growth of 7%.
Updated Sales Guidance
J&J has raised its annual sales forecast, now expecting revenues between $93.5 billion and $93.9 billion, an increase from the previous guidance of $93.2 billion to $93.6 billion. The company maintained its adjustment profit guidance at $10.80 to $10.90 per share. Analysts predict earnings at $10.85 per share and sales around $93.48 billion.
The company’s strategic moves and solid financial performance have generated significant interest, particularly from S&P stock investors.
