Johnson & Johnson (JNJ) stock saw a positive reception following the company's announcement of its Q4 earnings and a robust 2026 forecast, which surpassed Wall Street estimates despite a significant financial impact from a recent drug pricing deal. The healthcare conglomerate's performance underscores its resilience in the face of regulatory challenges and competitive pressures.
Strong Q4 Performance
For the fourth quarter, JNJ reported an adjusted profit of $6 billion, or $2.46 per share, exceeding the consensus estimate of $2.44 per share. Revenue for the quarter reached $24.56 billion, topping expectations of $24.16 billion. This strong performance was driven by solid sales in both its Innovative Medicine division and medical devices business.
Innovative Medicine Division
The Innovative Medicine division, JNJ's largest business segment, saw a 10% increase in sales to $15.76 billion, surpassing analysts' estimates of $15.37 billion. Key contributors to this growth included the blood cancer therapy Darzalex and the psoriasis drug Tremfya, both of which experienced strong sales.
Medical Devices Business
The medical devices business also showed resilience, with quarterly sales rising 7.5% to $8.8 billion. This growth indicates that despite tariff uncertainties and regulatory challenges, the segment remains a solid performer for the company.
2026 Forecast Exceeds Expectations
JNJ's forecast for 2026 further solidified investor confidence. The company projected operational sales of $99.5 billion to $100.5 billion, exceeding analysts' estimates of $98.9 billion. Full-year 2026 profit is expected to come in at $11.43 to $11.63 per share, slightly above the consensus forecast of $11.45 per share.
Impact of Drug Pricing Deal
Despite the positive outlook, JNJ faces a financial hit from a drug pricing deal signed with the U.S. government earlier this month. The agreement is part of a broader effort to lower drug prices for Americans, with JNJ being one of 16 major pharmaceutical companies participating. The company disclosed that the deal will result in a financial impact of "hundreds of millions of dollars."
Chief Financial Officer Joseph Wolk highlighted the company's ability to surpass expectations despite this impact, stating, "It's a credit to the team here that we were able to surpass what (analyst) expectations are for 2026 by a pretty sizable amount while digesting that impact."
Challenges and Opportunities
While JNJ's performance is commendable, the company faces several challenges. One significant concern is the ongoing legal battles over its talc products, with a court-appointed special master recently recommending that expert testimony linking the products to ovarian cancer be allowed in court. JNJ maintains that its products are safe and do not cause cancer.
Additionally, the company is navigating tariff uncertainties on its medical devices unit and rising competition for its blockbuster psoriasis drug Stelara from biosimilars. Stelara sales declined more than analysts had forecast, a trend Wolk acknowledged but emphasized that the broader portfolio is growing robustly.
Future Outlook
Wolk expressed confidence in the company's future, stating, "If you just take Stelara out of that mix, that portfolio is growing 14%, 15%. Those are the products that we're going to rely on for the next couple years and the balance of this decade." This sentiment reflects JNJ's strategic focus on leveraging its strong pipeline and existing products to drive long-term growth.
Market Reaction
The market reacted positively to JNJ's earnings and forecast, with investors appreciating the company's ability to navigate complex regulatory and competitive landscapes. The stock's performance underscores the importance of diversified product portfolios and strong operational execution in the healthcare sector.
As JNJ continues to address its legal challenges and adapt to evolving market conditions, its ability to maintain and exceed financial expectations will be closely watched by investors and analysts alike.
