J&J's MedTech Unit Sales Improve in Q2: Will the Upside Continue?
In the second quarter, MedTech segment sales came in at $8.54 billion, up 7.3% from the year-ago period, including an operational increase of 6.1% and a positive currency impact of 1.2%. MedTech segment sales beat the Zacks Consensus Estimate of $8.25 billion.
Excluding the impact of all acquisitions and divestitures, and currency, on an adjusted operational basis, worldwide sales rose 4.1%, driven by strong momentum in Cardiovascular, Surgery and Vision.
In the MedTech segment, sales rose 8.0% in the United States and 4.1% outside of the United States on an operational basis. The MedTech business improved from the first-quarter levels, driven by the newly acquired cardiovascular businesses, Abiomed and Shockwave, as well as in Surgical Vision and wound closure in Surgery. Moreover, improvements in J&J's electrophysiology business also drove the sequential growth.
However, the company continues to face headwinds in China. Sales in China are being hurt by the impact of the volume-based procurement (VBP) program. VBP is a government-driven cost containment effort in China.
J&J looks confident about sustaining the improvement in the MedTech segment in the second half of the year. Sales are expected to be higher in the second half than the first half as the business moves past tougher first-half comps and new products gain momentum throughout 2025. Increased adoption of newly launched products in Cardiovascular, Surgery and Vision is likely to drive growth in the second half.
However, J&J expects continued impacts from VBP issues in China in 2025 as the program continues to expand across provinces and products.
J&J's Key Competitors in the Medical Devices Market
J&J's MedTech unit faces strong competition from several major players in the medical device industry like Medtronic MDT, Abbott, Stryker SYK and Boston ScientificBSX.
While Medtronic has a strong presence in cardiovascular, neuroscience and surgical technologies, Stryker is a global leader in medical technology, specializing in innovative solutions across surgical, neurotechnology, orthopedics and spine care. Boston Scientific markets products for cardiovascular, endoscopy, urology and neuromodulation. Abbott is known for its medical device products across cardiovascular, diagnostics and diabetes care.
JNJ's Price Performance, Valuation and Estimates
J&J's shares have outperformed the industry year to date. The stock has risen 22.2% in the year-to-date period against a 6.7% decrease of the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, J&J is expensive. Going by the price/earnings ratio, the company's shares currently trade at 15.57 forward earnings, higher than 13.71 for the industry. The stock is, however, trading below its five-year mean of 15.66.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2025 earnings has risen from $10.64 per share to $10.86 per share for 2025 and from $11.07 per share to $11.36 per share over the past 30 days.
Image Source: Zacks Investment Research
J&J has a Zacks Rank #2 (Buy) currently. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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