Johnson & Johnson (NYSE:JNJ) first quarter results on Tuesday bode well for the Medtech industry's earnings season, broker Wedbush said.
The US Medical Devices division at JNJ delivered one of its best underlying growth quarters in over two years.
JNJ, not rated by Wedbush, a bellwether for the Medtech industry, reported 1Q16 earnings, with the Medical Devices and Diagnostics division reporting revenues of $6.1bn, up 3% year-on-year on a comparable constant currency basis.
Importantly, US sales were up 3.3%, which represents one of the company's best underlying performances over the last several quarters, and bodes well for Medical Devices in general. Wedbush said.
"Specifically, as it relates to our coverage universe, details from J&J's earnings commentary have, in our opinion, positive implications for business trends at Tandem Diabetes (NASDAQ:TNDM, OUTPERFORM), Intuitive Surgical (NASDAQ:ISRG, OUTPERFORM), and St. Jude Medical (NYSE:STJ, OUTPERFORM). For Medtronic (NYSE:MDT, NEUTRAL), the results had neutral-to-positive implications," the broker said.
JNJ reported weak results in diabetes with US sales down 15.1% in the US with JNJ citing competitor insulin pump launches as one of the reasons.
"We would note that Tandem Diabetes is the only pump manufacturer who has launched a new system in the past 6 months (the well-liked t:slim G4). This would be in line with our recent survey work which indicated that TNDM's insulin pumps were expected to be the most preferred among people with T1D over the next 6 months. It may also suggest that Insulet's (PODD, OUTPERFORM) improved commercialization efforts may be gaining continued traction," Wedbiush added.
JNJ reported strong top-line results from its advanced surgery segment, which grew 9.7% yr/yr (ex-FX) globally and 7% in the US with the key driver being higher sales of advanced instrumentation used in minimally invasive surgery.
Specifically, sales of staplers and energy products were up 10% and 8% yr/yr, respectively. We believe these results reflect the ongoing trend toward minimally-invasive procedures, and this has positive implications for ISRG.
As a reminder, ISRG guided toward da Vinci procedure growth of 9-12% in FY16, and the majority of da Vinci procedures still include the use of J&J and Covidien's (Medtronic) advanced instrumentation.
"However, we view these results could also be viewed as mixed for MDT, as they could either be due to share gains by JNJ (negative for MDT), or a robust minimally-invasive surgery market (positive for MDT)," Wedbush said.
JNJ shares were up 1.6% at $112.68.