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Pharma Giant J&J Reports Rising Earnings, Sales — And Legal Fees

Dow Jones component Johnson & Johnson (JNJ) has spent $832 million this year to fight north of 100,000 legal battles but doesn't expect to set aside legal reserves to continue the skirmishes, the company said Tuesday as it reported third-quarter earnings that came in ahead of views.

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The pharmaceutical company is embroiled in numerous lawsuits related to its talcum-based body powders, the opioid epidemic and an antipsychotic drug. But Johnson & Johnson says it will appeal verdicts and continue to fight unsettled cases.

So, even though J&J's litigation expenses have increased 18% this year, the pharmaceutical company isn't planning to set aside any additional dough to help it fight those legal battles, Chief Financial Officer Joseph Wolk told Bloomberg TV in an interview early Tuesday.

"Right now if you think about some of the cases that are out there, they are likely subject to our prevailing on appeal," he said. "There's nothing to book, nothing to accuse. It wouldn't even meet the accounting standards."

JNJ Stock Rises In Spite Of Lawsuits

Of the bigger headlines, a Philadelphia jury ruled last week that J&J must pay $8 billion for failing to warn physicians of a side effect of an antipsychotic drug. A male patient reportedly developed female breast tissue after taking an antipsychotic medicine called Risperdal.

J&J will also pay $20.4 million to counties in Ohio in an opioid settlement. Further, an Oklahoma judge said the pharmaceutical company must pay $572 million to help abate the state's opioid crisis.

In 2018, a Missouri jury ruled J&J must pay $4.69 billion to 22 women and families who say asbestos in the company's talcum powders caused them to develop cancer.

All together, the rulings and settlements are a small piece of J&J sales. On Tuesday, the pharmaceutical company reported $20.73 billion in third-quarter sales. That unexpectedly increased despite analyst projections for a year-over-year dip.

On the stock market today, JNJ stock rose 1.6%, to 132.84. Shares of the pharmaceutical company are forming a flat base with a buy point at 145.08. On Tuesday, JNJ stock remained roughly 8% below that potential entry.

JNJ Earnings, Sales Unexpectedly Rise

Early Tuesday, J&J posted an unexpected increase in third-quarter earnings and sales. Adjusted JNJ earnings edged up 3.4% year over year to $2.12 per share. Analysts polled by Zacks Investment Research expected JNJ earnings of $2 per share.

Sales advanced 1.9%. Analysts called for a slight decline to $20.08 billion.

The best growth came from pharmaceutical sales, which increased 6.4% on an adjusted basis. International medicine sales outpaced U.S. sales growth, continuing a trend seen throughout 2018. Of five mega-blockbusters, four grew by double-digit percentages.

"Thus, the growth brands are sustaining momentum, with the exception of Xarelto," RBC Capital Markets analyst Brandon Henry said in a report to clients. "Remicade and Zytiga erosion is largely consistent with recent trends."

Further, sales of medical devices jumped 5.3% to $6.38 billion. J&J's consumer unit, which includes its talc-based body powders, inched up 1.3% to $3.47 billion.

For the year, the pharmaceutical company guided to earnings of $8.62-$8.67 a share on revenue of $81.8 billion to $82.3 billion. Before the third-quarter beat, the Street projected JNJ earnings of $8.59 per share and $81.46 billion in sales.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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