Johnson & Johnson Exceeds Q4 Expectations with Strong Cancer Portfolio, Despite Acquisition Costs

LOCAL MARKET COMMENTARY

South African markets ended slightly lower yesterday, with the Top 40 index slipping 0.25% to 76,273.2 points and the All Share index down 0.23% to 84,654.6 points. Consumer inflation rose to 3.0% year-on-year in December, marginally above November’s 2.9%, but below forecasts of 3.2% and well under the South African Reserve Bank’s 4.5% target. Retail sales surged 7.7% year-on-year in November, driven by interest rate cuts, easing inflation, and reforms allowing partial early pension withdrawals.

EUROPEAN MARKET COMMENTARY

European stocks advanced yesterday, with the STOXX 600 closing 0.4% higher, marking its best close since September 2024 and a new intra-day peak. Gains were led by technology and industrial stocks, as investors brushed off concerns about potential U.S. tariffs. European Central Bank (ECB) policymakers signalled further rate cuts, with ECB President Christine Lagarde hinting at gradual easing based on upcoming economic data. Attention now shifts to France's business confidence index and the eurozone's flash consumer confidence data, both due today.

US MARKET COMMENTARY

Wall Street closed higher yesterday, with the S&P 500 hitting a new intraday record. Strong earnings from Netflix and optimism around AI investments fuelled gains, following the announcement of a $500 billion private-sector AI infrastructure initiative by Oracle, OpenAI, and SoftBank. While funding details remain unclear, Oracle surged 6.8%, while ARM Holdings and Dell posted gains of 15.9% and 3.6%, respectively.

ASIA MARKET COMMENTARY

Asian markets showed mixed performance this morning as investors digested regional economic data. Japan’s exports grew 2.8% year-on-year in December, exceeding expectations, while imports rose 1.8%, falling short of forecasts. The country reported a trade surplus of ¥130.9 billion, defying deficit predictions. South Korea’s GDP grew 1.2% year-on-year in Q4, its slowest pace since mid-2023, missing estimates. For the full year, GDP growth in 2024 improved to 2%, compared to 1.4% in 2023.

CURRENCY MARKET COMMENTARY

The South African rand remained stable after data showed inflation was softer than expected and retail sales performed strongly in November. Globally, the U.S. dollar held firm amid uncertainty about potential U.S. tariffs. The British pound climbed to a two-week high against the dollar, supported by the greenback’s subdued performance ahead of central bank policy announcements, including an expected rate hike from the Bank of Japan.

COMMODITY MARKET COMMENTARY

Gold prices edged lower today as a stronger U.S. dollar weighed on the market, while investors awaited clarity on U.S. trade policy. Oil prices continued to decline amid uncertainty over potential new U.S. tariffs. U.S. crude oil inventories are anticipated to show a drop of 1.6 million barrels, while gasoline stockpiles are expected to increase by 2.3 million barrels.

Mr Price Group (MRP) -3.14%

Mr Price Group delivered an impressive Q3 performance for the 13 weeks ending 28 December 2024, with retail sales growing 10.6% year-on-year (2-year CAGR: 10.3%) to R14.6 billion. This growth was driven by market share gains and enhanced gross profit margins. Comparable store sales increased 6.3%, while online sales rose 10.5%, contributing 1.8% to total retail sales. Improved full-price sales, reduced markdowns, and a retail selling price inflation of 5.3% resulted in unit sales growth of 4.8%. December saw standout sales growth of 12.8%, with the Apparel segment growing 10.9% and achieving a record market share. The Homeware segment posted a 7.9% increase, with Yuppiechef recording double-digit growth and its highest December market share to date. Telecoms led the pack with a robust 16.5% growth, supported by strong Black Friday and December performance. Cash sales grew 11.1%, accounting for 90.9% of total retail sales, while credit sales rose 5.7%. The group continued its expansion, opening its 3,000th store and ending the quarter with 3,031 stores, a 4.9% increase in trading space. Management remains confident about further profitable market share gains, underpinned by improving consumer conditions, lower inflation, and declining interest rates. January has already shown double-digit growth across all segments, positioning Mr Price for a strong year-end performance despite global and domestic uncertainties.

Quilter Plc (QLT) +3.10%

Quilter Plc achieved record-breaking core net inflows of £5.2 billion in 2024, bolstered by a strong Q4 that saw net inflows of £2.0 billion, equating to 7% of opening Assets under Management and Administration (AuMA) on an annualized basis. Group AuMA climbed 3% for the quarter to £119.4 billion, driven by robust inflows, stable market conditions, and Sterling weakness. The High Net Worth segment demonstrated resilience, with new business momentum persisting despite October outflows from pre-Budget asset repositioning. This segment achieved net inflows of £208 million, a notable improvement from a £76 million outflow in Q4 2023. Meanwhile, the Affluent segment posted exceptional results, with gross inflows surging 58% year-on-year to £3.9 billion and net inflows reaching £1.8 billion—far exceeding the £287 million recorded in Q4 2023. Quilter’s Platform proposition delivered record Q4 net inflows of £1.9 billion, representing 9% of opening AuMA. Both Quilter channel and IFA channel inflows showed significant growth, with IFA net inflows jumping to £1.3 billion from £6 million in Q4 2023. Persistency remained robust at 92% for the High Net Worth segment and 90% for Affluent, while adviser productivity improved slightly to £3.3 million in annualized gross sales.

Johnson & Johnson (JNJ) -1.94%

Johnson & Johnson, following its recent $14.6 billion acquisition of neurological drugmaker Intra-Cellular, exceeded Wall Street’s expectations for fourth-quarter revenue and profit. This growth was fuelled by robust performance in its cancer treatment portfolio. After spinning off its consumer unit in 2023, J&J has focused on expanding its pharmaceuticals and medical devices segments through acquisitions. The Intra-Cellular purchase, the company’s largest in two years, bolsters its psychiatric drug offerings but is anticipated to reduce annual earnings by $0.30–$0.35 per share in 2025. For 2025, J&J projects revenue between $90.9 billion and $91.7 billion and earnings per share (EPS) of $10.75–$10.95, excluding the impact of the acquisition and a $0.25 foreign currency hit. Analysts had estimated $90.98 billion in revenue and $10.56 EPS. Fourth-quarter sales reached $22.52 billion, a 5.3% year-over-year increase, surpassing forecasts of $22.42 billion. Adjusted EPS for the quarter stood at $2.04, above the consensus estimate of $2.01, despite including a $0.22 charge for the acquisition of medical device-maker V-Wave. International sales accounted for 43.4% of J&J’s 2024 total revenue, highlighting the company's global footprint.

The Procter & Gamble Company (PG) +1.87%

Procter & Gamble exceeded quarterly expectations for both revenue and profit, driven by strong demand in the U.S. for household staples such as dish soaps and toilet paper, alongside signs of recovery in the Chinese market. Organic volumes increased by 2% during the quarter, while average product pricing remained steady, marking a shift from prior reliance on price hikes for growth. Net sales rose 2.1% year-over-year to $21.88 billion, surpassing analyst projections of $21.54 billion. Quarterly earnings per share came in at $1.88, marginally ahead of the anticipated $1.86.

Puma SE (PUM) +3.05%

Puma announced a cost-reduction initiative after reporting a 2024 net profit of €282 million ($294 million), down from €305 million in 2023 and below company expectations. Increased debt-related interest payments and higher non-controlling interests, notably from its joint venture with United Legwear & Apparel Co., contributed to the decline. The company aims to restore its EBIT margin to 8.5% by 2027, with a long-term goal of 10%. Puma’s EBIT margin for 2024 stood at 7.1%. Fourth-quarter sales increased by 9.8% in currency-adjusted terms to €2.29 billion ($2.38 billion), with annual sales up 4.4% to €8.82 billion. Regionally, fourth-quarter sales grew 14.3% in Europe, the Middle East, and Africa, and 7.4% in Greater China. Footwear sales rose by 9.2%, while apparel sales increased by 8.8%. Puma’s full annual and quarterly results are scheduled for release on March 12.

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