Johnson & Johnson’s 1Q16: Which Segments Led Its Earnings Growth?

(Continued from Prior Part)

Medical devices segment

Johnson & Johnson’s (JNJ) medical devices segment rose by ~0.5% at constant exchange rates. It reported revenue of ~$6,109 million for 1Q16 compared to 1Q15. Foreign exchange impacted this segment by -2.9% in 1Q16, resulting in an overall fall of ~2.4%.

Cardiovascular care

Cardiovascular care sales fell by 14.4% at constant exchange rates to $443 million in 1Q16. This fall was due to the divestiture of JNJ’s Cordis business in 4Q15, partially offset by a rise in the electrophysiology business, specifically the Thermocool Smart Touch Contact Force Sensing Catheter.

Diabetes care

Diabetes care sales fell by 8.2% at constant exchange rates in 1Q16, due to pricing pressures and competition from new pumps in the Market. The revenue drivers for diabetes care include Animas Vibe, the insulin pump, and the volume growth of self-monitoring blood glucose devices.

Orthopedics

Orthopedics reported a rise of 3.0% in revenue at constant exchange rates, driven by rises in revenues for hip, knee, and trauma products. Foreign exchange had an impact of -2.4% on the segment, resulting in a net rise in revenue of ~0.6% in 1Q16 over 1Q15. Overall, orthopedics reported sales of $2.3 billion, nearly 37.7% of total segment sales.

Overall revenues for knee products and hip products rose by over 5% at constant exchange rates during the quarter due to strong sales of the Attune Knee System and the primary stem platform. Other products Orthovisc and Monovisc and trauma product TFN Advanced Nailing System had strong performances during the quarter.

Surgery

Surgery products sales rose 2.3% at constant exchange rates in 1Q16, driven by increased sales of endo cutters, biosurgical products, and energy products in advanced surgery, increased sales of sutures and topical adhesives in general surgery, and increased sales of ASP and mentor products in specialty surgery.

In advanced surgery, biosurgical product sales rose 8% worldwide, endo cutters sales rose ~10% worldwide, and energy products sales rose 8% outside the United States in 1Q16. The launch of new products and market growth caused electrophysiology sales to rise by 19%.

Vision care

Vision care sales rose ~4.1% at constant exchange rates to $640 million in 1Q16, following the strong performance of new products in all major markets worldwide.

Investors can consider ETFs such as the Fidelity MSCI Healthcare Index ETF (FHLC), which holds 8.8% of its portfolio in JNJ, in order to divest risk. FHLC also holds 4.4% of its portfolio in Gilead Sciences (GILD), 6.1% in Pfizer (PFE), and 4.9% in Merck & Co. (MRK).