Johnson & Johnson said on Tuesday its lowering its 2022 sales forecast amid rising inflation and foreign-exchange fluctuations.
The company now expects full-year revenue of $93.3 billion to $94.3 billion, down from its prior forecast of $94.8 billion to $95.8 billion, CFO Joe Wolk said during an earnings call.
In total, the company expects a $4 billion negative impact from currency pressures, Wolk added.
“It's not just that the Euro and U.S. dollar have reached parity, something we haven't seen in nearly two decades, it's also the rapid pace at which the fluctuations are occurring, a dynamic only experienced a few times over that same period,” the CFO said.
These market dynamics spilled over into the company’s medtech segment, where revenue fell in the second quarter from the year-earlier period.
In the U.S., medtech sales increased 1.6%, while outside of the U.S., foreign-exchange pressures and pandemic-related restrictions led to a 3.6% decline.
Margins for the segment dropped from 28.6% to 26.5%, driven by inflation, an unfavorable product mix and increased investments in research and development, Jessica Moore, vice president of investor relations, said on the call.
Like other medtechs, the segment also is grappling with higher costs of materials and wage pressures, though those are starting to stabilize, Wolk said.
The company expects a stronger second half of the year, driven by a recovery from the pandemic and an uptake of newly launched products, such as a new surgical stapler and a balloon guide catheter designed to remove blood clots. Wolk said the fourth quarter is expected to be slightly stronger than prior three-month period, though COVID-19 remains a “dynamic situation” regionally.
CEO Joaquin Duato continued to focus on new products and acquisitions as growth drivers for the segment.
“The focus continues to be strengthening our current strongholds and also accessing some high growth market segments to accelerate growth,” Duato said.
Some of these areas include eye health, orthopedics and heart surgery.
Duato also touted the company’s M&A plans that were announced last quarter, though 2022 has been a quiet year for medtech deals so far. In February, J&J bought CrossRoad Extremity Systems, which makes implants and instruments for lower foot surgeries, for an undisclosed amount.
Given that most medtechs experienced a stronger second quarter in 2021, Stifel analysts wrote in a note on Tuesday that the results are an “encouraging starting point” heading into earnings.
The analysts added that J&J’s results bode well for procedure-heavy companies like Stryker and Zimmer Biomet, while BTIG analysts expect a positive read-through for robotic surgery company Intuitive Surgical.
