How much of the growth was affected by COVID-19 vaccine sales?

COVID-19 vaccine sales were a significant drag. Q4 vaccine sales were $44 million, down 93.7% from $689 million a year earlier, and full-year sales were $1.1 billion, down 48.8%. Excluding the vaccine, Q4 operational growth was 10.9% versus 7.2% including it, and full-year operational growth was 9.0% versus 7.4%.

Why did full-year GAAP EPS decline while adjusted EPS grew?

GAAP diluted EPS from continuing operations fell 15.3% to $5.20, mainly because of a one-time first-quarter litigation-related charge of about $7.15 billion pre-tax. Adjusted EPS, which excludes litigation, intangible amortization, restructuring and other special items, rose 11.1% to $9.92.

Are the Q4 GAAP earnings representative of underlying performance?

Not entirely. Q4 GAAP EPS of $1.70 included $435 million of securities gains and $421 million of other income, partly offset by $1.15 billion of intangible amortization and $166 million of litigation costs. Adjusted EPS of $2.29 is the better measure of underlying earnings power, though investors should still review the non-GAAP reconciliation.

What is the 2024 outlook and how does it compare to 2023?

Management reaffirmed 2024 adjusted operational sales growth of 5.0% to 6.0% and adjusted operational EPS of $10.55 to $10.75. The midpoint implies about 7.4% EPS growth. Reported sales growth is guided lower, at 4.5% to 5.5%, because of currency and divestiture effects. The company also flagged that it does not forecast GAAP results because legal outcomes and other special items are not predictable.

Which segment drove growth, and what changed in the mix?

MedTech was the stronger growth engine, with Q4 worldwide sales up 13.3% and full-year sales up 10.8%, helped by Abiomed and strength in electrophysiology and interventional solutions. Innovative Medicine grew more modestly, at 4.2% in Q4 and 4.2% for the full year reported, but excluding COVID-19 vaccine it grew 9.7% in Q4. Growth was led by DARZALEX, STELARA, TREMFYA, SPRAVATO and ERLEADA, partly offset by ZYTIGA, IMBRUVICA and REMICADE.

JNJ 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 23, 2024. Cited figures are marked; the original filing is the authoritative source.

Johnson & Johnson reported fourth-quarter 2023 worldwide sales of $21.4 billion^a, up 7.3% reported and 7.2% operationally.

Adjusted operational growth, which excludes acquisitions, divestitures and currency, was 5.7%. Excluding COVID-19 vaccine sales, operational growth was 10.9%, which is the cleaner read on the underlying business. Q4 GAAP diluted EPS from continuing operations was $1.70^b, up 39.3%, while adjusted EPS was $2.29, up 11.7%.

Gains on securities of $435 million^c and other income of $421 million helped the GAAP figure. MedTech was the strongest segment, with worldwide sales up 13.3% and Abiomed contributing meaningfully. Innovative Medicine grew 4.2% reported, or 9.7% excluding COVID-19 vaccine, led by DARZALEX, STELARA, TREMFYA, SPRAVATO and ERLEADA.

For the full year, sales rose 6.5% to $85.2 billion^d, with operational growth of 7.4% and adjusted operational growth of 5.9%. Excluding COVID-19 vaccine, operational growth was 9.0%. Full-year GAAP diluted EPS from continuing operations fell 15.3% to $5.20, driven by a one-time litigation-related charge of roughly $7.2 billion pre-tax in the first quarter.

Adjusted EPS rose 11.1% to $9.92. Management reaffirmed 2024 guidance of 5.0% to 6.0% adjusted operational sales growth and adjusted operational EPS of $10.55 to $10.75, implying about 7.4% growth at the midpoint.

The filing is an Item 2.02 earnings disclosure rather than a material event. The main investor considerations are the sustainability of growth as COVID-19 vaccine revenue runs off, the recurring nature of litigation charges reflected in GAAP results, and the 2024 share count, which reflects the Kenvue exchange offer.

02—Key points

Key Highlights

Q4 2023 worldwide sales of $21.4B, up 7.3% reported and 7.2% operationally; excluding COVID-19 vaccine, operational growth was 10.9%.
Q4 GAAP diluted EPS from continuing operations of $1.70 (up 39.3%) versus adjusted EPS of $2.29 (up 11.7%); the GAAP figure benefited from $435M in securities gains.
FY 2023 sales of $85.2B (up 6.5%); adjusted operational growth of 5.9%, or 9.0% excluding COVID-19 vaccine.
FY 2023 GAAP diluted EPS fell 15.3% to $5.20 due to a one-time first-quarter litigation-related charge; adjusted EPS rose 11.1% to $9.92.
MedTech Q4 worldwide sales grew 13.3%, with adjusted operational growth of 9.1%; Abiomed added 4.7% to full-year MedTech growth.
Innovative Medicine Q4 sales grew 4.2% reported, or 9.7% excluding COVID-19 vaccine, driven by DARZALEX, STELARA, TREMFYA, SPRAVATO and ERLEADA.
2024 guidance reaffirmed: 5.0% to 6.0% adjusted operational sales growth and adjusted operational EPS of $10.55 to $10.75 (about 7.4% growth at midpoint); diluted shares of about 2,435 million reflect the Kenvue exchange offer.

03—Questions

Frequently Asked Questions

How much of the growth was affected by COVID-19 vaccine sales?
COVID-19 vaccine sales were a significant drag. Q4 vaccine sales were $44 million, down 93.7% from $689 million a year earlier, and full-year sales were $1.1 billion, down 48.8%. Excluding the vaccine, Q4 operational growth was 10.9% versus 7.2% including it, and full-year operational growth was 9.0% versus 7.4%.
Why did full-year GAAP EPS decline while adjusted EPS grew?
GAAP diluted EPS from continuing operations fell 15.3% to $5.20, mainly because of a one-time first-quarter litigation-related charge of about $7.15 billion pre-tax. Adjusted EPS, which excludes litigation, intangible amortization, restructuring and other special items, rose 11.1% to $9.92.
Are the Q4 GAAP earnings representative of underlying performance?
Not entirely. Q4 GAAP EPS of $1.70 included $435 million of securities gains and $421 million of other income, partly offset by $1.15 billion of intangible amortization and $166 million of litigation costs. Adjusted EPS of $2.29 is the better measure of underlying earnings power, though investors should still review the non-GAAP reconciliation.
What is the 2024 outlook and how does it compare to 2023?
Management reaffirmed 2024 adjusted operational sales growth of 5.0% to 6.0% and adjusted operational EPS of $10.55 to $10.75. The midpoint implies about 7.4% EPS growth. Reported sales growth is guided lower, at 4.5% to 5.5%, because of currency and divestiture effects. The company also flagged that it does not forecast GAAP results because legal outcomes and other special items are not predictable.
Which segment drove growth, and what changed in the mix?
MedTech was the stronger growth engine, with Q4 worldwide sales up 13.3% and full-year sales up 10.8%, helped by Abiomed and strength in electrophysiology and interventional solutions. Innovative Medicine grew more modestly, at 4.2% in Q4 and 4.2% for the full year reported, but excluding COVID-19 vaccine it grew 9.7% in Q4. Growth was led by DARZALEX, STELARA, TREMFYA, SPRAVATO and ERLEADA, partly offset by ZYTIGA, IMBRUVICA and REMICADE.

04—Continue

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