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As the third quarter of 2024 comes to a close, Wall Street is abuzz with the latest earnings reports from some of the biggest names in finance and healthcare. Today, we’ll take a comprehensive look at the Q3 results for Johnson & Johnson, UnitedHealth Group, Bank of America, Goldman Sachs, and Citigroup. These reports offer valuable insights into the current state of the US economy and provide a glimpse into what we might expect in the coming months.
Johnson & Johnson: Beating Expectations Despite Challenges
Johnson & Johnson (NYSE: JNJ) started the earnings season on a strong note, surpassing analyst expectations for both revenue and earnings per share. The pharmaceutical giant reported adjusted earnings per share of $2.42, down 9.0% year-over-year but still beating the consensus estimate of $2.21. Revenue came in at $22.47 billion, up 5.2% from the previous year and ahead of the expected $22.16 billion.
The company’s Innovative Medicine segment was a key driver of growth, with sales increasing to $14.58 billion, up 4.9% (or 6.3% on an adjusted operational basis). This growth was primarily fueled by strong performances from drugs like Darzalex, Erleada, Carvykti, Tremfya, Spravato, and Opsumit. Notably, Darzalex sales rose an impressive 22.9% to $3.02 billion, while the cancer cell therapy Carvykti saw a staggering 87.6% year-over-year increase, generating $286 million in sales.
However, it wasn’t all smooth sailing for J&J. The company faced headwinds in its MedTech division, particularly in endocutter products within the Advanced Surgery segment. Additionally, sales of Stelara, a key product for the company, fell 5.7% to $2.68 billion.
Looking ahead, Johnson & Johnson updated its full-year 2024 guidance. The company now expects operational sales of $89.4 billion to $89.8 billion, up from its previous forecast of $89.2 billion to $89.6 billion. However, J&J slightly lowered its adjusted earnings per share guidance to $9.88–$9.98, down from the prior range of $9.97–$10.07.
Despite the strong quarter, J&J’s stock was down 1.29% in premarket trading, indicating that investors may have been looking for even stronger results or were concerned about the lowered EPS guidance.
UnitedHealth Group: Mixed Results and Market Concerns
UnitedHealth Group (NYSE: UNH) delivered a mixed bag of results for Q3 2024, beating revenue expectations but facing challenges with rising medical costs. The company reported adjusted revenue of $100.08 billion, surpassing analyst projections of $99.26 billion. However, UnitedHealth’s adjusted earnings per share of $7.16, while beating the expected $6.61, included some one-time factors that made the beat less impressive to investors.
The real story for UnitedHealth this quarter was the surge in medical costs. The company reported a medical cost ratio (MCR) of 85.2%, significantly higher than the 82.3% reported a year earlier and missing analyst expectations of 84.4%. This increase in the MCR indicates that UnitedHealth is spending more on patient care relative to the premiums it collects, which could pressure profitability going forward.
UnitedHealth also faced ongoing challenges from the cyberattack on its Change Healthcare subsidiary earlier in the year. The company estimated the total impact from the cyberattack in the first quarter was 74 cents per share, with an expected full-year impact between $1.15 and $1.35 per share.
Looking to 2025, UnitedHealth provided initial guidance that fell short of analyst expectations. The company expects about $30 per share for the top end of its adjusted 2025 earnings outlook, below the $31.17 analyst consensus. This conservative outlook, coupled with the rising medical costs, sent UnitedHealth’s stock tumbling, with shares down 9% following the earnings release.
Despite these challenges, UnitedHealth’s CEO, Andrew Witty, remained optimistic about the company’s future. He highlighted the progress made in restoring Change Healthcare’s services and the company’s efforts to address rising healthcare costs, particularly in its Medicaid business.
Bank of America: Trading Strength Offsets Interest Income Decline
Bank of America (NYSE: BAC) reported better-than-expected Q3 results, with earnings per share of 81 cents beating the analyst estimate of 77 cents. Revenue came in at $25.49 billion, slightly above the expected $25.3 billion. However, net income fell 12% year-over-year to $6.9 billion, primarily due to higher provisions for loan losses and rising expenses.
The bank’s performance was bolstered by strong results in its trading and investment banking divisions. Fixed income trading revenue rose 8% to $2.9 billion, while equities trading jumped 18% to $2 billion. Investment banking fees surged 18% to $1.40 billion, all beating analyst expectations.
However, Bank of America faced headwinds in its core lending business. Net interest income (NII) fell 2.9% year-over-year to $14.1 billion, reflecting the challenging interest rate environment. Despite this decline, there were signs of improvement, with NII higher than in the second quarter, suggesting a potential turnaround in this key metric.
Bank of America’s provision for credit losses increased to $1.5 billion in the quarter, up from $1.2 billion a year earlier. This increase reflects the bank’s cautious stance on potential loan defaults as interest rates remain elevated.
Looking ahead, CFO Alastair Borthwick expressed optimism about the bank’s prospects, citing healthy customer deposit balances and asset quality. He also noted a good pipeline for investment banking activities, suggesting potential growth in this area in the coming quarters.
Investors responded positively to Bank of America’s results, with the stock climbing about 2% in early trading. This reaction suggests that the market views the bank’s diversified business model as a strength in navigating the current economic environment.
Goldman Sachs: Investment Banking Rebound Drives Strong Results
Goldman Sachs (NYSE: GS) delivered a strong beat on both earnings and revenue in Q3 2024, driven by a rebound in investment banking activities. The investment bank reported earnings per share of $8.40, significantly higher than the analyst estimate of $6.89. Revenue came in at $12.70 billion, beating the expected $11.8 billion.
The bank’s performance was particularly impressive in its equities trading division, which saw revenue increase by 18% to $3.5 billion, far exceeding the $2.96 billion analyst estimate. Investment banking revenue also showed strong growth, jumping 20% to $1.87 billion on the back of increased debt and equity underwriting activity.
Goldman’s asset and wealth management division also contributed to the strong results, with revenue climbing 16% to $3.75 billion. This growth was driven by rising management fees and gains in investments.
However, it wasn’t all positive news for Goldman. Fixed income trading revenue slipped 12% year-over-year to $2.96 billion, although this was still slightly above analyst expectations. The bank also faced some challenges in its consumer business, taking a one-time hit of $415 million related to the transfer of its credit card venture with General Motors to Barclays.
Looking forward, CEO David Solomon cited an “improving operating environment” and noted a significant pent-up demand from clients. The bank’s deal backlog increased in the third quarter, driven by its advisory business, suggesting potential for continued strong performance in investment banking.
Goldman Sachs’ shares initially rose on the earnings news but later settled to trade roughly flat. This muted reaction may reflect investor caution about the sustainability of the strong investment banking performance in light of ongoing economic uncertainties.
Citigroup: Investment Banking Strength Offsets Consumer Banking Weakness
Citigroup (NYSE: C) rounded out the big bank earnings with a smaller-than-expected drop in profit for Q3 2024, thanks to gains in investment banking, particularly in debt underwriting. The bank reported earnings per share of $1.51, beating the analyst consensus of $1.31. Revenue grew 1% year-over-year to $20.32 billion, surpassing the expected $19.84 billion.
Investment banking was a bright spot for Citigroup, with revenue jumping 31% to $934 million. This performance aligns with the trends seen at other major banks, reflecting a rebound in capital markets activity as corporate clients issued more debt and equity.
Citigroup’s services division also showed strong growth, with revenue climbing 8% to $5 billion. This was primarily driven by a 24% surge in revenue for securities services to $1.4 billion. The bank’s equities trading revenue also impressed, rising 32% to $1.2 billion.
However, Citigroup faced challenges in other areas. Net credit losses increased 33% year-over-year to $2.17 billion, reflecting ongoing concerns about consumer credit quality. The bank increased its total allowance for potential credit losses by about $1.9 billion, which contributed to the decline in net income.
Looking ahead, Citigroup reiterated its fiscal 2024 adjusted revenue outlook of $80 billion to $81 billion. CEO Jane Fraser highlighted the bank’s new cross-border payments capability with Mastercard and a $25 billion private credit partnership with Apollo Global Management as examples of strategic initiatives that could drive future growth.
Despite the better-than-expected results, Citigroup’s shares were down 1.5% in morning trading, possibly reflecting ongoing investor concerns about the bank’s restructuring efforts and its exposure to consumer credit risk.
Overall, these earnings reports paint a picture of an economy that is showing resilience in some areas (like capital markets activity) but facing challenges in others (such as consumer credit and healthcare costs). As we move forward, investors will be watching closely to see how these trends develop and how they might impact the broader economic landscape.
The mixed market reactions to these earnings reports – with some stocks rising and others falling despite generally beating expectations – suggest that investors are carefully weighing the positive results against ongoing economic uncertainties. As we progress through earnings season, these reports from major financial institutions and healthcare companies will likely set the tone for market expectations in the coming months.
Disclaimer: This article draws from sources such as Financial Times, Bloomberg,and other reputed media houses. Please note, this blog post is intended for general educational purposes only and does not serve as an offer, recommendation, or solicitation to buy or sell any securities. It may contain forward-looking statements, and actual outcomes can vary due to numerous factors. Past performance of any security does not guarantee future results.This blog is for informational purposes only. Neither the information contained herein, nor any opinion expressed, should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives.The information and opinions contained in the report were considered by VF Securities, Inc.to be valid when published. Any person placing reliance on the blog does so entirely at his or her own risk, and does not accept any liability as a result.Securities markets may be subject to rapid and unexpected price movements, and past performance is not necessarily an indication of future performance. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding investment in securities markets.
