Johnson & Johnson shares fall after company beats on earnings and revenue, but lowers pharmaceutical sales guidance

Johnson & Johnson shares fell Tuesday after the company reported adjusted earnings and revenue that topped Wall Street's expectations, but lowered its sales guidance for its pharmaceutical business.

J&J, whose financial results are considered a bellwether for many health companies, said its sales during the quarter grew 5.6% over the same quarter last year. 

The consumer staples giant reported a net loss of $68 million, or 3 cents per share, related to its talc baby powder liabilities and costs tied to the upcoming spinoff of its consumer health business. That compares with a net income of $5.2 billion, or $1.93 per share, for the same period a year ago. Excluding certain items, adjusted earnings per share were $2.68 for the period.

Here's how J&J results compared with Wall Street expectations, based on a survey of analysts by Refinitiv:

J&J slightly lowered its pharmaceutical sales target for 2025 to $57 million, down from the $60 million the company forecast two years ago. J&J executives on an earnings call cited currency dynamics, noting that foreign exchange headwinds had a negative impact of roughly $3 billion in the pharmaceutical business in 2022.

The stock closed nearly 3% lower Tuesday. Shares are down more than 9% for the year through the close, putting the company's market value at roughly $420 billion. 

J&J is now forecasting 2023 sales of $97.9 billion to $98.9 billion, about $1 billion higher than the guidance provided in January. The company raised its full-year adjusted earnings outlook to $10.60 to $10.70 per share, from a previous forecast of $10.45 to $10.65.

CFO Joseph Wolk told CNBC on Tuesday that J&J raised its guidance due to strong growth across all three business sectors — consumer health, pharmaceuticals and medical devices.

"If you think about how we started the year and guidance in January, we were responsibly cautious," he said on "Squawk Box." "First-quarter growth was much stronger than even fourth-quarter growth for all three business units, and our positions kind of change to responsibly optimistic at this point. We feel very good about 2023."

He added that data being produced on J&J's drug for the cancer multiple myeloma and procedural data in its medical devices unit make the company "feel very, very good about what lies beyond 2023."

J&J reported $13.4 billion in pharmaceutical sales, which grew more than 4% over the same quarter last year. The company said that increase was driven by sales of Darzalex, a biologic for the treatment of multiple myeloma, and the blockbuster drug Stelara, which is used to treat a number of immune-mediated inflammatory diseases.

J&J will lose patent protection on Stelara later this year. During a conference call, Wolk said the company is "committed to growing through the loss."

Sales for the company's medical devices business rose to nearly $7.5 billion, up 7.3% from the first quarter of 2022. J&J said its acquisition of Abiomed, a cardiovascular medical technology company, in December last year fueled that rise.

J&J's consumer health business, which it is spinning off into a separate publicly traded company this year, reported about $3.8 billion in sales. That unit grew 7.4% over the same period last year, primarily driven by over-the-counter products such as Tylenol and skin health products under brands such as Neutrogena and Aveeno.

Wolk told CNBC the company is making "great progress" on the separation of its consumer health business. But J&J hasn't been clear about when exactly the split will happen.

J&J also announced its board has approved a 5.3% quarterly dividend increase, to $1.19 per share, due to the company's strong 2022 performance.

The New Brunswick, New Jersey-based company entered this earnings season with its shares on the rise after it offered more clarity on the long-running legal fight over its talc-based baby powder products. Earlier this month, J&J proposed to pay nearly $9 billion over the next 25 years to settle thousands of allegations that its baby powder and other talc products caused cancer.

J&J's subsidiary LTL Management also refiled for Chapter 11 bankruptcy protection earlier this month after its first attempt was thwarted.

Wolk during a conference call said the company will bring the proposed reorganization plan to bankruptcy court in mid-May. He expressed confidence that claimants will vote to approve the plan, noting that 60,000 claimants have already committed to do so.

The company expects to win over a small but "vocal minority" of plaintiff attorneys who oppose the plan, added Andrew White, J&J's assistant general counsel.

Wolk continued to deny the talc allegations, calling it "unfortunate" that J&J has to "put dollars towards quite frankly baseless scientific claims."

Lawsuits allege the company's talc products were contaminated with the carcinogen asbestos, which caused ovarian cancer in thousands of individuals. Some suits link several deaths to J&J's talc products.

Read the full J&J earnings report.