Stock Watch: Positive Q3 For Johnson & Johnson Post-Kenvue

As usual, Johnson & Johnsonn (J&J) opened third-quarter earnings season for life science companies. Its first quarterly announcement since the separation of its consumer division Kenvue Inc. generated positive headlines. The tone of J&J’s post-Kenvue earnings announcement had the feel of a friendly divorce, although, as is typical with divorces, it impacted J&J’s financials. One of the reasons corporations restructure is to shed divisions with lower profitability. Consumer products are typically much less profitable than prescription drugs. But while J&J’s non-GAAP third-quarter earnings per share (EPS) grew by over 19% on the same quarter of 2022, and was nearly 6% ahead of analysts’ consensus estimates, the comparable figures from a year earlier excluded Kenvue so J&J’s improved third-quarter profitability could not be directly ascribed to the separation. J&J’s third-quarter non-GAAP EPS was only just over 4% ahead of the figure it reported the year before when it did include the now divorced Kenvue so direct and retrospective comparisons may have to await Kenvue’s third-quarter of 2023 announcement later in October. In any event, J&J’s results did illustrate a range of indirect impacts of corporate restructuring and their influence on J&J’s financials.

J&J’s separation was associated with an exchange offer of Kenvue for J&J stock which resulted in a 7% reduction in...