By Josh Nathan-Kazis

Johnson & Johnson reported earnings Tuesday that slightly beat consensus estimates, while announcing it would spin off a slower-growing division within its medical devices segment that makes hip and knee implants.

Johnson & Johnson's orthopaedics business accounted for 9.5% of the company's total sales in the third quarter of the year. Now, Johnson & Johnson plans to separate that business into a new company that will operate under the name DePuy Synthes.

While sales for Johnson & Johnson's medical devices division grew 5.6% on an operational basis between the third quarter of 2024 and the third quarter of 2025, orthopaedics sales grew more slowly, up just 2.4% over the same period.

"Orthopaedics, while it's a very strong business that's profitable, has strong cash flow, they are below what the rest of our portfolio has" in terms of revenue growth, Johnson & Johnson's CFO, Joe Wolk, told Barron's.

The reshuffling of the company's medical devices division comes two years after Johnson & Johnson sloughed off its consumer health division, which sold Tylenol and Band-Aids and other consumer products, and now operates independently under the name Kenvue.

Johnson & Johnson shares were up 32% this year as of the end of the day on Monday, following a series of positive guidance revisions and an improving political backdrop for the big drugmakers.

Pfizer and AstraZeneca have both announced deals with the Trump administration in recent weeks, extracting exemptions from threatened sector-specific drug tariffs in return for commitments that seem unlikely to inflict serious pain on either company. Drug stocks have soared in response.

Johnson & Johnson has yet to announce its own deal with the White House. Wolk said Johnson & Johnson's CEO, Joaquin Duato, has been "engaged with the administration," but wouldn't discuss the conversations.

"I think we're trying to find the right common ground, continue to spur innovation that leads to a healthy economy," Wolk said, adding that he thinks that will happen as talks continue.

On Tuesday, the company reported third-quarter earnings that slightly beat Wall Street expectations. It raised sales guidance for the full year, but maintained its earnings guidance.

Johnson & Johnson reported third-quarter sales of $24 billion, beating the FactSet consensus estimate of $23.8 billion. Adjusted diluted earnings were $2.80 per share, better than the FactSet consensus estimate of $2.76 per share.

The company now expects reported 2025 sales of between $93.5 billion and $93.9 billion, up from its prior guidance of between $93.2 billion and $93.6 billion. Analysts expect sales of $93.4 billion this year, according to FactSet.

"We did not raise on the bottom line, and I think it's important to remember where we started the year," Wolk told Barron's.

He noted that the company had raised its earnings guidance in July by 25 cents per share, and that the existing guidance includes an additional 25 cent per share charge due to the $14.6 billion acquisition of Intra-Cellular Therapies, which closed in April.

Patents on Johnson & Johnson's blockbuster immunology drug Stelara expired this year, and a number of biosimilar competitors have launched in recent months. In the third quarter, Stelara sales were $1.6 billion for the quarter, down 41.3% on a reported basis from the same quarter last year. Analysts had expected $1.7 billion in Stelara revenue, according to FactSet.

The company's pharmaceutical division reported $15.6 billion in sales for the third quarter, just above the FactSet consensus estimate of $15.4 billion. The medical devices division had sales of $8.4 billion, in-line with the consensus estimate.

"We were all a little bit disappointed in Q1's performance," Wolk said of the medical devices division. "But then you saw acceleration in Q2, with the promise that the second half would accelerate even further. Here you are in Q3 with even higher growth than Q2. So I think that positions us very well."

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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October 14, 2025 06:20 ET (10:20 GMT)

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