US HEALTHCARE: Johnson & Johnson: 3Q25 Earnings
Oct-14 12:48
(JNJ; Aaa/AAA/NR)
Raises FY25 Revenue Guidance and announces spin-off of Orthopaedics business. Credit Neutral
- 3Q25 revenues were up 6.8% y/y with organic growth of 5.4% driven by consistent growth across all three of JNJ's segments. Revenues in Innovative Medicines were up 6.8% y/y with JNJ's Oncology business driving the growth with sales up 21% y/y while the Immunology business saw revenues decline 9.8% y/y. Drugs such as Darzalex were up 21.7% y/y, Erleada up 18.4% and Tremfya up 41.3%.
- MedTech segment revenues were up 6.8% y/y to $8.4bn with strong growth in Cardiovascular (+12.6% y/y) and Vision (+7.7% y/y) product lines.
- JNJ reported adjusted EPS for the quarter of $2.80/share compared to Bloomberg consensus estimates of $2.78. Overall margins were up for 3Q25 as a result of 60bps improvement in gross margins and lower R&D spending in the quarter.
- JNJ updated FY25 guidance with sales growth now expected to be +5.4%-+5.9% compared to 5.1%-5.6% while maintaining its adjusted EPS guidance of $10.80-$10.90 (Bloomberg consensus estimates of $10.86/share).
- With 3Q25 earnings, JNJ also announced that it is planning to spin-off its Orthopaedics business in the MedTech segment. This segment generated approximately $9bn of revenues in FY24 (10% of JNJ total) and was likely a low-margin business given the competitive industry. The Company will operate under the DePuy Synthes name and they intend to complete the spin-off in 18-24 months. The Company is expected to have an investment-grade profile and we would expect the new entity to issue debt and direct the proceeds to JNJ.
- While JNJ doesn't release a balance sheet or cash flow with quarterly earnings, we estimate JNJ ended the quarter with gross leverage of ~1.5x and ~0.9x net. JNJ has been reducing debt after its $14bn Intra-Cellular acquisition in 1Q25 where gross leverage peaked at 1.8x. Based on updated FY25 guidance, we expect gross leverage to end the year just under 1.5x. We don't expect the Orhopaedics spin-off to have a material impact on JNJ's leverage profile given the smaller size and lower margins.
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
Sep-12 21:45
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
Sep-12 21:16
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Sep-12 21:07
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
