Johnson & Johnson Reports $93.8 Billion Revenue in 2021 and Signals Increased M&A Activity for 2022

Compiled by: Fan Dongdong

On January 25, Johnson & Johnson announced its 2021 performance, with the fourth-quarter results surpassing Wall Street expectations. It also indicated that the sales of its Covid-19 vaccine might increase to approximately $3.5 billion in 2022.

Earnings Report Shows Johnson & Johnson's Q4 2021 Earnings Per Share Reached $1.77, Up 172.3%; Adjusted Earnings Per Share Hit $2.13, A 14.5% Increase Year-over-Year, Exceeding Wall Street’s Consensus Estimate By 1 Cent. Q4 Sales Rose 10.4% to $24.8 Billion, Though Below Analyst Estimates of $25.29 Billion Due to Weak Pharmaceutical and Medical Device Sales. For the Full Year 2021, Earnings Per Share Were $7.81, Up 41.7% from Last Year; Adjusted Earnings Per Share Were $9.80, Reflecting a 22% Increase Year-over-Year. Total Annual Sales Were $93.8 Billion, Marking a 13.6% Year-over-Year Growth.

Looking ahead to fiscal year 2022, Johnson & Johnson stated that the adjusted earnings per share would be between $10.4 and $10.6, while Refinitiv's forecast is $10.35. The expected sales (including vaccines) are projected to be between $98.9 billion and $100.4 billion. The adjusted operational sales for 2022 are expected to increase by 7.7%, and the adjusted operational earnings per share are expected to grow by 9.2%. Additionally, the company is optimistic that the sales of the COVID-19 vaccine in 2022 should have the opportunity to grow to between $3 billion and $3.5 billion.

Johnson & Johnson’s New CEO, Joaquin Duato, stated that the 2021 performance reflects the long-term efforts of all business units, and in 2022, the company will continue to provide life-changing solutions for consumers, patients, and health. Duato believes that Johnson & Johnson's 2021 performance, financial position, and innovative product pipeline have laid a solid foundation for future success. Following the earnings report, Johnson & Johnson's stock price rose 0.8% in early trading to $164.5 per share, narrowing its six-month decline to approximately 4.4%.

Johnson & Johnson engages in mergers and acquisitions every year, and in 2022, the company may become more active in pursuing deals. Wolk expressed optimism about the future outlook while noting some fluctuations observed in the investment market, suggesting that 2022 might see increased investment in acquisitions. Potential acquisition targets include biotechnology companies, but the company may also explore transaction opportunities in the medical technology field.

In 2021, Johnson & Johnson invested $15 billion in R&D, surpassing the historical record of 2020, while its balance sheet reached the lowest level of net debt in five years. The company currently holds $32 billion in cash and marketable securities, along with $34 billion in debt. Duato also mentioned the expansion of acquisition plans during the earnings call on Tuesday this week, specifically pointing out that acquisitions might target smaller companies. He stated that Johnson & Johnson has always regarded mergers and acquisitions as a key source of business growth, and the current cash reserves are sufficient to support the company’s strategic plans in this area.

According to Wolk, Johnson & Johnson's overall business still faces certain challenges in the short term. Impacted by a new wave of the Covid-19 pandemic, medical technology sales have slowed, with the urgent issue being a shortage of staff in large hospital systems. The company’s consumer health division has also been hit by raw material supply constraints, labor shortages at third-party manufacturers, and rising transportation costs. However, as the pandemic continues to ease, Wolk anticipates growth in the second half of the year, with the pharmaceuticals business expected to achieve strong growth by 2025.

Johnson & Johnson stated in late November last year that it would spin off its consumer health division from its pharmaceuticals and medical devices businesses within 18 to 24 months. The division includes brands such as Band-Aid, baby powder, and Tylenol, which are expected to generate $15 billion in revenue in 2022. This split is part of a broader trend of business restructuring in the healthcare industry in recent years. In 2019, Pfizer and GlaxoSmithKline merged their over-the-counter drug divisions, and in 2014, Merck sold its consumer healthcare division to Bayer for $14.2 billion.

However, Moody's Investors Service warned that if Johnson & Johnson proceeds with the split, it might lose its AAA credit rating from the investment community. Additionally, some analysts believe this move by Johnson & Johnson is aimed at reducing litigation losses. As of October last year, defense costs related to 40,000 cases concerning asbestos contamination in its baby powder and other talc products reached nearly $1 billion, with settlement costs amounting to as much as $3.5 billion.

References:

1、Johnson & Johnson Tops Q4 Earnings Forecast, Sees $3.5 Billion in 2022 Covid Vaccine Sales

2、Johnson & Johnson Reports Q4 and Full-Year 2021 Results

3、Johnson & Johnson more bullish on acquisitions in volatile market: CFO