Johnson & Johnson Falls Nearly 7% After Talc Charge Wipes Out Q3 Profit Despite Raised Guidance

Johnson & Johnson reported third-quarter 2026 revenue of $25.4 billion, up 5.9% year over year and in line with Wall Street estimates, while adjusted earnings per share of $2.59 beat the consensus of roughly $2.52 to $2.54. Despite the beat and a raised full-year outlook, shares fell nearly 7% on Tuesday, on pace for their worst single-day drop since April 2025, as investors focused on a massive one-time charge and a miss in the medical device business.

GAAP net income collapsed 95.9% to $210 million, or $0.09 per share, compared with roughly $2.12 in the prior-year period. The steep drop reflected a special charge tied to J&J's proposed resolution of its ovarian talc litigation, along with costs from the acquisition of Firefly Bio and a collaboration agreement with Sail Biomedicines. The size of the litigation hit overshadowed the adjusted earnings beat and the raised outlook.

The pharmaceutical division, now called Innovative Medicine, was the clear bright spot, with sales rising 7.7% to $16.76 billion, ahead of the $16.59 billion estimate. Tremfya led the way with worldwide revenue of $2.4 billion, up 68.3% year over year and well above the $2.24 billion consensus, boosted by its expanding use in Crohn's disease after three-year data showed sustained clinical and endoscopic remission. Darzalex brought in $4.24 billion, slightly below the $4.33 billion estimate, while Carvykti generated $710 million.

The MedTech segment was a drag, with sales of $8.64 billion rising only 2.5% year over year and missing the $8.77 billion estimate. Management cited the Middle East conflict as a factor weighing on medical device sales, and CFO Joseph Wolk said the company is leaning toward spinning out its hips-and-knees orthopedic unit rather than selling it outright. J&J also warned that costs from its recent drug deals will weigh on 2027 earnings.

For the full year, J&J raised its sales guidance to $101.0 billion to $101.4 billion and lifted its adjusted EPS outlook to $11.05 to $11.15, up from a prior midpoint of roughly $10.94 on the operating basis. Year-to-date free cash flow stood at approximately $15.1 billion. The company also declared a quarterly dividend of $1.34 per share. On the regulatory front, J&J's OTTAVA robotic surgical system received market authorization as the world's first table-integrated soft tissue robotic system, and IMAAVY was approved for warm autoimmune hemolytic anemia, while RYBREVANT FASPRO received priority review.