Although Johnson & Johnson remains an undisputed force in health care, this has not been a flawless operation. The company's reputation is still in "recovery" after having dealt with some bad PR related to product recalls.
Now, there are new worries about Johnson & Johnson's organic growth. While I do believe these fears are overblown, JNJ's first-quarter report didn't exactly reduce that level of distress, even though the stock price presumes "all is well."As with JNJ's fourth-quarter report, there were more missed opportunities in the first quarter although the company posted revenue of $17.5 billion, which grew 8.5% year over year, in line with expectations. However, at solid as the 8.5% growth appears, on an organic basis that number was slightly above 3% when adjusting out the contribution from Synthes, which JNJ acquired last year. While the Synthes deal has certainly nursed JNJ's business back to health after some chronic pains, I'd admit it's unfair to discredit the company's overall performance, given that management had the vision to realize that Synthes would have been a great deal. Nevertheless, on an operational basis, with Synthes the revenue was up 10%. Domestic sales grew slightly above 11%, while international sales posted gains of more than a 6%.
The Pharmaceutical business contributed handsomely this quarter, growing 11% on an operational basis year over year. JNJ's flagship drugs, including Zytiga and Xarelto, were solid performers. However, the majority of the sales were domestic, outpacing international growth by more than two to one. This isn't cause for concern but a better balance would work wonders for organic growth. Consumer sales were sedated, growing at just 2% year over year although sales were 1% better on an operational basis. Management attributed the positive results to over-the-counter products such as Tylenol and Motrin while also citing better uptake in baby care and skin care product such as Neutrogena.
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