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Johnson & Johnson (JNJ) beat first quarter earnings expectations, but concerns over a $400 million tariff impact, mainly from China, are keeping shares flat. Yahoo Finance Senior Reporter Anjalee Khemlani joins Market Domination to show how the company's medical device business is feeling the pressure.
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Johnson & Johnson tops first quarter earnings estimates, but the pharma company expecting a tariff impact on business. And Yahoo Finance's Anjalee Khemlani joins us now with the very latest, Anj.
That's right, Josh. And we know that of course, tariffs are top of mind for the entire pharma sector as, we know, we heard the announcement from the administration yesterday about the specific pharmaceutical tariffs. Uh, Johnson & Johnson sort of bridges two gaps. It's it also sells medical devices and that includes to China. So that is where a lot of the impact comes from for the business. Just taking a quick look at the earnings, they did beat on both the revenue as well as earnings per share, but that doesn't seem to really have helped their stock. It's been trading largely flat, but, you know, slightly negative all day long. And that's because Wall Street is still waiting to hear about the final impacts. We took a look at what they said during the earnings call and they said they were expecting about $400 million in terms of impact and that's largely coming from those medical devices. I had a chance to catch up with CFO Joe Wolk earlier today and here's what he had to say specifically about where that $400 million is coming from. Take a listen.
The tariffs that we've included in that 400 million relate to products that are not exempt under USMCA, some of the aluminum and steel tariffs that currently exist and apply to our MedTech products, and then the China tariffs, both, uh, uh, from China as well as the retaliatory, uh, tariffs that China had levied upon us. That last piece makes up probably about 70% of the total $400 million. So those are products of origin here in the US being shipped to China, and that's the impact that we we actually have. So we'll have to see with respect to pharmaceutical tariffs.
So they're still waiting like the rest of the industry for the rest of the, you know, the other shoe to drop, essentially. And that's where things stand right now for, uh, for the medical devices. Uh, we've seen analyst notes all day talking about how they have less protection, uh, from China in particular, but also the Mexico, Canada, as you as they mentioned, or as he mentioned earlier, about the steel and aluminum there. Uh, looking at what's ahead and how to sort of, you know, wait for everything else to fall out for the year, I asked him how he's thinking about this, in particular how to, you know, run the company knowing that the the situation is still kind of fluid. And here's what Joe had to say.
My only role, I guess, as CFO at this point would be to look at the profitability of business. If these tariffs continue to escalate, then you just have to make decisions like we would in any other part of our business. And we're currently doing within our orthopedics and surgery portfolio, rationalizing skews that are on the less profitable and perhaps even unprofitable side, in either certain markets or certain product portfolios. And that would be no different.
So, as you can see, just looking at, uh, you know, rationalizing the business, and this is already impacting the company, the first of the major pharmaceuticals to report in this quarter. So we'll just have to wait and see how the rest stack up by comparison.
All right, thank you, Anj. Appreciate it.
