• Worldwide Sales: $21.9 billion, increased 4.2% despite a 470 basis point headwind from STELARA.
• Net Earnings: $11 billion, with diluted earnings per share of $4.54.
• Adjusted Net Earnings: $6.7 billion, with adjusted diluted earnings per share of $2.77, up 1.9% and 2.2% respectively.
• Innovative Medicine Sales: $13.9 billion, increased 4.2% despite an 810 basis point headwind from STELARA.
• MedTech Sales: $8 billion, increased 4.1%.
• Free Cash Flow: Approximately $3.4 billion.
• Dividend Increase: 4.8%, marking the 63rd consecutive year of increases.
• Operational Sales Growth Guidance: Increased by $700 million, now expected to be 3.3% to 4.3% for the full year.
• Adjusted Operational Sales Growth: 2% to 3% compared to 2024.
• Interest Income and Expense: Net income of $128 million, down from $209 million in Q1 2024.
• Effective Tax Rate: 19.3%, up from 12.4% in the same period last year.

• Warning! GuruFocus has detected 4 Warning Signs with BOM:540133.

Release Date: April 15, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Johnson & Johnson (NYSE:JNJ) delivered strong operational sales growth of 4.2% in Q1 2025, despite headwinds from STELARA's loss of exclusivity.
• The company's Innovative Medicine sector achieved 4.2% operational sales growth, with 11 key brands growing double digits.
• MedTech sector showed 4.1% operational sales growth, driven by strong performance in cardiovascular businesses and surgical vision.
• Johnson & Johnson (NYSE:JNJ) announced a commitment to invest over $55 billion in the US over the next four years, enhancing manufacturing and R&D capabilities.
• The company increased its dividend for the 63rd consecutive year, reflecting its commitment to returning capital to shareholders.

Negative Points

• STELARA faced an approximate 810 basis points headwind due to biosimilar competition, impacting overall sales growth.
• Gross margins were below recent trends, affected by the loss of exclusivity for STELARA and Part D redesign.
• The orthopedic segment experienced a decline of 3.1%, impacted by competitive pressures and one-time events.
• Tariffs, particularly those related to China, are expected to have a significant impact on costs, with a $400 million impact anticipated in 2025.
• The company faces ongoing litigation challenges related to the Talc bankruptcy ruling, which could impact future financial performance.

Q & A Highlights

Q: Joe, you mentioned $400 million in tariffs in the 2025 guidance. What is that on an annualized basis, and how do you plan to mitigate it? A: Joseph Wolk, CFO, explained that the $400 million primarily involves MedTech tariffs, including those from Mexico, Canada, and China. The most significant impact comes from US-origin products shipped to China. Mitigation strategies are limited due to existing contractual agreements, but tax policy is seen as a more effective tool than tariffs for building US manufacturing capacity.

Q: Can you explain the drivers behind the lower gross margins this quarter and the outlook going forward? A: Joseph Wolk, CFO, noted that the decline was due to the impact of STELARA's loss of exclusivity, Part D redesign, and unfavorable currency effects. He expects margins to improve by 100 to 150 basis points moving forward, despite the tariff impacts.

Q: How do you see the erosion of STELARA being offset by other brands like TREMFYA? A: Jennifer Taubert, EVP, Worldwide Chairman, Innovative Medicine, stated that the impact of STELARA's loss was in line with expectations, and the business excluding STELARA grew over 12%. TREMFYA is gaining traction, especially with recent approvals in inflammatory bowel disease, and is expected to offset some of the erosion.

Q: How recession-proof is Johnson & Johnson's business, and which areas might be most at risk? A: Joseph Wolk, CFO, mentioned that healthcare is generally more recession-proof than other industries. While elective procedures might be delayed, they are not abandoned. The company monitors job reports as an indicator of healthcare coverage and demand.

Q: Can you provide more details on the orthopedic sales decline and the recovery outlook? A: Tim Schmid, EVP, Worldwide Chairman of MedTech, explained that the decline was due to one-time events like revenue recognition changes and fewer selling days. Despite competitive pressures, the company expects improved performance due to new product launches and commercial execution.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.