Why did GAAP and adjusted EPS decline in Q4 2024 even though sales grew 5.3%?

Operating expenses grew faster than sales. R&D expense rose 18.3% and SG&A rose 11.1%, compared with 5.3% reported sales growth. Q4 EPS also absorbed a $(0.22) acquired IPR&D charge from the V-Wave acquisition. Q4 2023 also benefited from $(435)M of securities gains, which partly reversed in 2024, so the year-over-year comparison is not like-for-like.

How much did currency and acquisitions affect reported growth?

Currency was a headwind of 1.4% in Q4 and 1.6% for the full year, reducing reported growth relative to operational growth. Acquisitions, primarily Shockwave, added to MedTech growth, and the company's adjusted operational growth excludes this net acquisition impact. Adjusted operational growth is therefore a better gauge of underlying organic demand, at 5.7% in Q4 and 5.4% for the year.

What is driving the 2025 guidance and what are the key risks?

The 2025 guidance of 2.0%-3.0% adjusted operational sales growth (excluding COVID-19 vaccine) is well below 2024's 5.4% pace, although the company guides EPS growth of about 8.7% at the midpoint on an adjusted operational basis. Key risks include continued STELARA erosion as biosimilar competition grows, the temporary pause of U.S. VARIPULSE cases, and the operational and integration risk of the newly announced Intra-Cellular Therapies acquisition. Investors should also watch the sustainability of operating expense growth in R&D and SG&A.

Which products are the main growth drivers and which are declining?

Growth drivers in 2024 included DARZALEX (FY reported sales $11.7B, +19.8%), CARVYKTI ($963M, +92.7%), ERLEADA ($3.0B, +25.6%), TREMFYA ($3.7B, +16.6%), SPRAVATO ($1.1B, +56.4%), and electrophysiology products in MedTech. The main decliners were STELARA (FY $10.4B, -4.6%), which is facing biosimilar pressure, and Infectious Diseases (FY -23.1%), reflecting the COVID-19 vaccine decline and the exit of certain programs.

Was the 2024 U.S. performance strong enough to offset weakness internationally?

Yes, in the short term. U.S. sales grew 8.3% for the full year and 10.0% in Q4, now representing about 57% of total sales (50.3B of 88.8B). International sales were roughly flat in Q4 (-0.7% reported, +2.0% adjusted operational) and grew 1.9% on an adjusted basis for the full year. Currency weighed heavily on International results, but the U.S. business is the primary engine of reported growth.

JNJ 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 22, 2025. Cited figures are marked; the original filing is the authoritative source.

Johnson & Johnson reported fourth-quarter 2024 reported sales of $22.5 billion^a, up 5.3%, with operational growth of 6.7% and adjusted operational growth of 5.7% excluding acquisitions, divestitures and currency.

U.S. sales rose 10.0%, while International sales were roughly flat (-0.7% reported, +2.0% adjusted operational). GAAP EPS fell 17.1% to $1.41^b and adjusted EPS fell 10.9% to $2.04, which includes a $(0.22) charge for acquired IPR&D related to the V-Wave acquisition. Q4 R&D rose 18.3% and SG&A rose 11.1%, which pressured earnings even as sales grew.

For full-year 2024, reported sales reached $88.8 billion^c (+4.3%), with adjusted operational growth of 5.4% and 7.0% excluding COVID-19 vaccine sales. GAAP EPS rose 11.3% to $5.79, but adjusted EPS was nearly flat at $9.98 (+0.6%) because of $(0.67) of acquired IPR&D charges. Innovative Medicine grew 5.8% on an adjusted operational basis, led by DARZALEX, ERLEADA, CARVYKTI, TREMFYA and SPRAVATO, partly offset by STELARA, which declined 14.7% in Q4.

MedTech grew 4.7% on an adjusted operational basis, driven by electrophysiology and Abiomed. Currency was a 1.6% headwind for the full year. Management guided 2025 adjusted operational sales growth of 2.0% to 3.0% (2.5% midpoint, excluding COVID-19 vaccine), operational sales growth of 2.5% to 3.5%, and reported sales of $89.2 billion to $90.0 billion^d (0.5% to 1.5% growth at the midpoint).

Adjusted operational EPS is guided to $10.75 to $10.95 (8.7% growth at the midpoint), and adjusted EPS to $10.50 to $10.70. Investors should note the post-quarter announcement of the Intra-Cellular Therapies acquisition and the temporary pause of U.S. VARIPULSE cases announced January 5, 2025.

02—Key points

Key Highlights

Q4 2024 reported sales of $22.52B (+5.3%); operational growth +6.7%, adjusted operational growth +5.7%. U.S. +10.0% vs. International -0.7%.
Q4 GAAP EPS of $1.41 (-17.1%) and adjusted EPS of $2.04 (-10.9%), both including a $(0.22) V-Wave acquired IPR&D charge; Q4 R&D +18.3% and SG&A +11.1% weighed on earnings.
FY 2024 reported sales of $88.8B (+4.3%); adjusted operational growth +5.4%, or +7.0% excluding COVID-19 vaccine. FY GAAP EPS $5.79 (+11.3%); adjusted EPS $9.98 (+0.6%), including $(0.67) of acquired IPR&D charges.
Innovative Medicine FY adjusted operational growth of 5.8% (7.5% ex-COVID vaccine) with strong contributions from DARZALEX, ERLEADA, CARVYKTI, TREMFYA and SPRAVATO, offset by STELARA erosion (Q4 -14.7% reported).
MedTech FY adjusted operational growth of 4.7%, led by electrophysiology, Abiomed and Shockwave (acquired May 31, 2024), with Shockwave contributing about $564M in FY 2024 sales.
2025 guidance: adjusted operational sales growth of 2.0%-3.0% (ex-COVID vaccine), reported sales of $89.2B-$90.0B, and adjusted operational EPS of $10.75-$10.95 (8.7% midpoint growth).
Post-quarter events include the Intra-Cellular Therapies acquisition and a temporary pause of U.S. VARIPULSE external evaluation and cases (January 5, 2025); FY 2024 free cash flow was estimated at about $19.8B.

03—Questions

Frequently Asked Questions

Why did GAAP and adjusted EPS decline in Q4 2024 even though sales grew 5.3%?
Operating expenses grew faster than sales. R&D expense rose 18.3% and SG&A rose 11.1%, compared with 5.3% reported sales growth. Q4 EPS also absorbed a $(0.22) acquired IPR&D charge from the V-Wave acquisition. Q4 2023 also benefited from $(435)M of securities gains, which partly reversed in 2024, so the year-over-year comparison is not like-for-like.
How much did currency and acquisitions affect reported growth?
Currency was a headwind of 1.4% in Q4 and 1.6% for the full year, reducing reported growth relative to operational growth. Acquisitions, primarily Shockwave, added to MedTech growth, and the company's adjusted operational growth excludes this net acquisition impact. Adjusted operational growth is therefore a better gauge of underlying organic demand, at 5.7% in Q4 and 5.4% for the year.
What is driving the 2025 guidance and what are the key risks?
The 2025 guidance of 2.0%-3.0% adjusted operational sales growth (excluding COVID-19 vaccine) is well below 2024's 5.4% pace, although the company guides EPS growth of about 8.7% at the midpoint on an adjusted operational basis. Key risks include continued STELARA erosion as biosimilar competition grows, the temporary pause of U.S. VARIPULSE cases, and the operational and integration risk of the newly announced Intra-Cellular Therapies acquisition. Investors should also watch the sustainability of operating expense growth in R&D and SG&A.
Which products are the main growth drivers and which are declining?
Growth drivers in 2024 included DARZALEX (FY reported sales $11.7B, +19.8%), CARVYKTI ($963M, +92.7%), ERLEADA ($3.0B, +25.6%), TREMFYA ($3.7B, +16.6%), SPRAVATO ($1.1B, +56.4%), and electrophysiology products in MedTech. The main decliners were STELARA (FY $10.4B, -4.6%), which is facing biosimilar pressure, and Infectious Diseases (FY -23.1%), reflecting the COVID-19 vaccine decline and the exit of certain programs.
Was the 2024 U.S. performance strong enough to offset weakness internationally?
Yes, in the short term. U.S. sales grew 8.3% for the full year and 10.0% in Q4, now representing about 57% of total sales (50.3B of 88.8B). International sales were roughly flat in Q4 (-0.7% reported, +2.0% adjusted operational) and grew 1.9% on an adjusted basis for the full year. Currency weighed heavily on International results, but the U.S. business is the primary engine of reported growth.

04—Continue

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