Johnson & Johnson's JNJ shares have declined 1.5% since it reported second-quarter 2026 results on July 15.
J&J beat estimates for both earnings and sales in the second quarter. While earnings rose 4.7%, sales rose 6.6% from the year-ago period. Backed by a strong second-quarter performance and uptake of new products, J&J raised its 2026 sales and earnings guidance for the year. However, its shares declined despite the beat-and-raise performance as its MedTech unit underperformed expectations. While sales in its Innovative Medicine segment remain strong and are the primary driver of top-line growth, its soft MedTech growth was the primary factor that led the shares to decline.
Let's discuss what went wrong at MedTech in the second quarter.
What Caused J&J’s MedTech Unit to Underperform in Q2?
J&J’s MedTech sales increased 4.5% to $8.93 billion in the second quarter, including operational growth of 3.6%. However, MedTech segment sales slightly missed the Zacks Consensus Estimate of $8.96 billion. MedTech segment sales were mainly hurt by the soft performance of its Cardiovascular business.
Cardiovascular sales rose 3.1% on an operational basis. However, the growth was slower than prior trends due to competitive pressure in the electrophysiology business and a decline in Abiomed sales, partially offset by continued double-digit growth in Shockwave.
Electrophysiology sales increased 3.1% as procedure growth, commercial execution and contribution from new products were partially offset by competitive PFA pressures and negative impact from China inventory dynamics.
Abiomed sales declined 2% in the second quarter as procedure volumes slowed due to changes in Impella usage patterns. The slowdown followed a recent U.K. clinical trial that questioned the benefit of Impella devices in certain high-risk procedures, prompting physicians to reassess patient selection and adopt a more cautious approach to using the device. However, Abiomed sales in outside U.S. markets remained strong.
J&J believes this is a temporary issue and is working with physicians to ensure the device is used in the right patients based on its existing clinical evidence.
Reflecting these challenges, J&J tempered its outlook for Abiomed, now expecting only modest growth in the second half of 2026 rather than the stronger rebound it had previously anticipated. The impact of the U.K. study is expected to linger and impact Abiomed’s growth until the PROTECT IV data is presented in 2027. PROTECT IV is a large clinical trial of the company’s Impella device in high-risk percutaneous coronary intervention (PCI).
Will J&J’s MedTech Sales Recover From Here?
On the conference call, J&J clarified that while its Cardiovascular sales slowed down in the second quarter, its other three businesses, Surgery, Vision and Orthopedics all accelerated in the quarter and performed above expectations. J&J claimed that overall procedure volumes were stable and there was no broad-based slowdown in medical procedure volumes across its MedTech business.
J&J clarified that although some large U.S. hospitals have reported weaker volumes for certain elective procedures, those trends are not reflected in its own business. J&J also said that the expiration of Affordable Care Act (ACA) subsidies has not had any meaningful impact on procedure volumes so far and is unlikely to materially affect MedTech demand.
J&J expects MedTech growth to improve in the second half, driven by strength in Vision, Orthopedics, Surgery and better performance in Cardiovascular.
Overall, J&J’s second -quarter results were strong. Although the MedTech business experienced temporary weakness, management remains confident that growth will improve in the second half. Meanwhile, the Innovative Medicine segment continues to exhibit robust underlying fundamentals, supported by sustained demand for its growth portfolio and a promising outlook.
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 Scientific BSX.
While Medtronic has a strong presence in cardiovascular, neuroscience and surgical technologies, Stryker is a major player in orthopedics and surgical equipment. 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 so far this year. The stock has risen 22.1% this year compared with 10.2% appreciation of the industry.
From a valuation standpoint, J&J is slightly expensive. Going by the price/earnings ratio, the company’s shares currently trade at 20.58 forward earnings, higher than 18.46 for the industry. The stock is also trading above its five-year mean of 15.65.
The Zacks Consensus Estimate for 2026 earnings has risen from $11.59 per share to $11.61 per share over the past seven days, while that for 2027 earnings has gone up from $12.66 per share to $12.67 over the same time frame.
J&J has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).