Johnson & Johnson Signals It Could Make Additional Divestitures

More divestitures could be in Johnson & Johnson's (JNJ) future.
 
On an earnings call on Tuesday, July 18, chief financial officer Dominic Caruso noted that among Johnson & Johnson's priorities is to actively manage its portfolio to maximize value.

"Our ongoing reviews suggest we currently have more opportunity to divest some nonstrategic businesses which will result in higher other income gains," Caruso said.

Asked by an analyst for more details on the potential divestitures, Caruso said they are smaller brands across multiple businesses.

"We'll have to see whether we can get the right value for those assets before we actually execute on them," he said.

Among the divestitures that have already been announced this year was the sale of Johnson & Johnson's Codman Neurosurgery business to Integra Lifesciences Holdings Corp. (IART) for $1.05 billion. The deal is expected to close in the fourth quarter.

In June, Johnson & Johnson units Cilag GmbH International and Janssen Pharmaceutica NV sold a portfolio of European over-the-counter products to Trimb Healthcare AB.

Meanwhile, Johnson & Johnson continues to review options for its diabetes care business, company officials said Tuesday. Johnson & Johnson said in January it was looking at potential strategic options for the diabetes care unit, including LifeScan, Animas and Calibra Medical.

New Brunswick, N.J.-based Johnson & Johnson on Tuesday reported second-quarter earnings that beat expectations and revenue that came in below consensus estimates. The company reported adjusted earnings per share of $1.83, up 5.2% from the same period a year ago, and revenue of $18.8 billion, up 1.9% year-over-year. Analysts surveyed by Bloomberg had forecast adjusted EPS of $1.79 on revenue of $18.9 billion.

Pharmaceutical sales worldwide were $8.6 billion, down 0.2% compared to the same period last year. The company said worldwide operational sales growth was impacted negatively by about four points because of a "positive adjustment of U.S. rebate accruals in the second quarter of 2016, which did not repeat in the second quarter of 2017."

In a Tuesday note, Leerink Partners LLC analyst Geoffrey C. Porges said the pharmaceutical unit grew 5% sequentially but was flat annually and the growth rates were fueled by sales outside the U.S. rather than U.S. sales.

"Across the board JNJ's flagship legacy pharmaceutical brands such as Remicade, Simponi, and Procrit were soft, but new products met or beat consensus," Porges wrote. 

Medical devices sales were $6.7 billion, up 4.9%, and consumer sales were $3.5 billion, up 1.7%.

Johnson & Johnson upped its full-year sales guidance to $75.8 billion to $76.1 billion and its adjusted earnings guidance to $7.12 to $7.22 a share. Previously, it forecast full-year 2017 sales of $75.4 billion to $76.1 billion and adjusted earnings of $7.00 to $7.15 a share.

Chairman and CEO Alex Gorsky said on the call that the company is "optimistic that the investments we made and strategies we put in place can continue to build the momentum we need to accelerate our growth in the second half of the year."

During the second quarter, Johnson & Johnson completed its purchase of Swiss biotech Actelion Ltd. for $30 billion.

Among the topics that was discussed during the call was potential healthcare reform. Gorsky said the company continues to "support initiatives that expand access to affordable health care and improve long-term sustainability of the U.S. health care system."

As for the potential executive order on pharmaceutical pricing, Gorsky said Johnson & Johnson understands "the concern about the cost of healthcare and believe we have a responsibility to ensure our products are both accessible and representative of the outcomes and value they deliver."

And commenting on potential tax reform, he said the company remains "optimistic that there are opportunities for modernization of the corporate tax code in the near future," adding that the firm continues to monitor any developments.

Shares of Johnson & Johnson closed at $134.46 Tuesday, up 1.8%.

Worried about how to finance your golden years? Register here to watch a free webinar in which TheStreet's Jim Cramer talks with Ken Fisher, founder of Fisher Investments, about the market trends shaping retirement planning today.

More of What's Trending on TheStreet:

More from Health

Can Legal Cannabis Help Slow the Opioid Drug Epidemic in the U.S.?

Can Legal Cannabis Help Slow the Opioid Drug Epidemic in the U.S.?

Sprout CEO: Don't Call Her Drug the Female Viagra

Sprout CEO: Don't Call Her Drug the Female Viagra

What's the Difference Between CBD vs. THC?

What's the Difference Between CBD vs. THC?

How to Invest in Cannabis - In Its Many Forms

How to Invest in Cannabis - In Its Many Forms

Eli Lilly, AstraZeneca Shares Fall After Halting Alzheimer's Drug Test

Eli Lilly, AstraZeneca Shares Fall After Halting Alzheimer's Drug Test