Raphael Stevens

Johnson & Johnson reported first-quarter adjusted earnings that topped expectations as sales in its medical devices business surged.
The company is benefiting from a rebound in demand for nonurgent surgeries among older adults, who deferred those procedures during the Covid pandemic.
Meanwhile, the company’s total revenue for the period came in-line with estimates.
J&J will hold an earnings call with investors at 8:30 a.m. ET on Tuesday.

An entry sign to the Johnson & Johnson campus shows their logo in Irvine, California on August 28, 2019.
Mark Ralston | AFP | Getty Images

Johnson & Johnson on Tuesday reported first-quarter adjusted earnings that topped Wall Street’s expectations as sales in its medical devices business surged.
Meanwhile, the company’s total revenue for the period was largely in line with estimates.

J&J’s medtech division provides devices for surgeries, orthopedics and vision. The company is benefiting from a rebound in demand for nonurgent surgeries among older adults, who deferred those procedures during the Covid pandemic. That increased demand has been observed by health insurers like Humana, UnitedHealth Group and Elevance Health.
J&J CFO Joseph Wolk told CNBC’s “Squawk Box” on Tuesday that consumers may be pulling back in other areas but “don’t want to compromise when it comes to their health, their mobility, their ability to live a fulfilling life.” He added that the company has seen elevated procedure levels after the pandemic, and “we haven’t seen any backtracking of that.”
Here’s what J&J reported for the first quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

Earnings per share: $2.71 adjusted vs. $2.64 expected
Revenue: $21.38 billion vs. $21.4 billion expected

J&J’s financial results are considered a bellwether for the broader health sector.
The company posted $21.38 billion in total sales for the first three months of 2024, up more than 2% from the same quarter in 2023. 

The pharmaceutical giant booked net income of $5.35 billion, or $2.20 per share during the quarter. That compares with a net loss of $491 million, or 19 cents per share, for the year-earlier period. At the time, J&J recorded costs tied to its talc baby powder liabilities and the spinoff of its consumer health unit Kenvue. 
Excluding certain items for the first quarter of 2024, adjusted earnings per share were $2.71.
J&J also narrowed its full-year guidance for the year. The company now expects sales of $88 billion to $88.4 billion. That compares with a previous forecast of $87.8 billion to $88.6 billion. 
J&J expects adjusted earnings of $10.57 to $10.72 per share. That compares to a previous guidance of $10.55 to $10.75 per share.
Separately on Tuesday, J&J said it will increase its quarterly dividend to $1.24 per share, up 4.2% from $1.19 per share. That marks the company’s 62nd year of consecutive dividend increases, it said. The dividend is payable on June 4.

Medical device unit

The results come weeks after J&J’s whopping $13.1 billion acquisition of heart device firm Shockwave Medical — part of its push into the cardiovascular space. Both companies have said the deal will make J&J a leader in four quickly growing cardiovascular technology categories. 
J&J has scooped up two other heart device companies over the last two years, spending $16.6 billion to buy Abiomed and $400 million to acquire private company Laminar. 
Those deals also aim to strengthen J&J’s medical devices business after the company’s separation from its consumer health unit Kenvue last year.
J&J’s medical devices business generated sales of $7.82 billion during the first quarter, up more than 4% year over year. Wall Street was expecting revenue of $7.87 billion, according to estimates compiled by StreetAccount.
J&J said its acquisition of Abiomed fueled the year-over-year rise. The growth also came from electrophysiological products, which evaluate the heart’s electrical system and help doctors understand the cause of abnormal heart rhythms, according to J&J. 
Wound closure products and devices for orthopedic trauma, or serious injuries of the skeletal or muscular system, contributed, along with contact lenses.

Other segments

Meanwhile, J&J reported $13.56 billion in pharmaceutical sales, marking around 1% year-over-year growth. Excluding sales of its unpopular Covid vaccine, revenue in the pharmaceutical division grew almost 7%.
It was the fourth quarter without any U.S. sales from J&J’s Covid vaccine, which brought in $25 million in international revenue.
Analysts were expecting sales of $13.5 billion for the business segment, according to StreetAccount. The business, also known as “Innovative Medicine,” is focused on developing drugs across different disease areas.

More CNBC health coverage

The company said the growth was driven by sales of Darzalex, a biologic for the treatment of multiple myeloma, and Erleada, a prostate cancer treatment. J&J’s Carvykti, a cell therapy approved for a certain blood cancer, and other oncology treatments also contributed to the rise.
But first-quarter sales of the company’s blockbuster drug Stelara, which is used to treat several chronic and potentially disabling conditions such as Crohn’s disease, were relatively flat from the same period a year ago.
Stelara brought in $2.45 billion in sales for the quarter. Wall Street was expecting revenue of $2.61 billion.
J&J began to lose patent protections on Stelara late last year, which opened up the door for cheaper biosimilar competitors to enter the market. But the company has signed settlement agreements with Amgen and other drugmakers to delay the launch of some Stelara copycats to 2025.

Talc liabilities

J&J’s first-quarter results come amid investor anxiety over the tens of thousands of lawsuits claiming that the company’s talc-based products were contaminated with the carcinogen asbestos and caused ovarian cancer and several deaths.
Those products, which include J&J’s namesake baby powder, now fall under Kenvue. But J&J will assume all talc-related liabilities that arise in the U.S. and Canada.
Notably, a federal judge ruled in March that J&J can contest scientific evidence that links its talc products to ovarian cancer, which could potentially disrupt a federal court case that consolidates 53,000 lawsuits.
Wolk on Tuesday called that ruling a “very significant development” and said the evidence being brought against J&J is “junk science.” But he noted that it’s difficult to provide a timeline for when the company will reach a broad resolution for the ongoing litigation.
In January, J&J said it has reached a tentative settlement to resolve an investigation by more than 40 states into claims the company misled patients about the safety of its talc-based products. The company will pay $700 million to settle the probe, Wolk told The Wall Street Journal at the time.
Last year, J&J set aside about $400 million to resolve U.S. state consumer protection claims.
Notably, the settlement does not resolve the lawsuits, some of which are slated to go to trial this year. 

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Volkswagen workers in Chattanooga, Tennessee, will vote this week in a closely watched election on whether to organize with the United Auto Workers union.
A victory would give the UAW its first major automaker win outside the Big Three in Detroit — General Motors, Ford, and Chrysler parent Stellantis — as well as a launching point for its unprecedented organizing campaign.
A loss would mark the union’s latest organizing failure following decades of unsuccessful drives outside the Big Three and would be a major setback for the organization.

A Volkswagen automobile assembly plant is seen on March 20, 2024 in Chattanooga, Tennessee.
Elijah Nouvelage | Getty Images

DETROIT — Volkswagen workers in Chattanooga, Tennessee, will vote this week on whether to organize with the United Auto Workers in a key test of the union’s sway.
A victory would give the UAW its first major automaker win outside General Motors, Ford Motor, and Chrysler parent Stellantis. It would also offer a launching point for the union’s unprecedented organizing campaign of 13 automakers in the U.S. following major contract wins in 2023 with the Detroit companies.

A loss would mark the Detroit-based union’s latest organizing failure following decades of unsuccessful drives outside the Big Three, including at the Tennessee VW plant in 2014 and 2019. It also would be a major setback for the UAW and President Shawn Fain, who was elected in 2023 as a reform candidate following a yearslong federal corruption scandal involving former union leaders.
More than 4,000 VW workers are eligible to vote, beginning Wednesday and ending at 8 p.m. EDT on Friday. The organizing vote, which is being overseen by the National Labor Relations Board, will need a simple majority to succeed.
Fain and others see this week’s vote as the union’s best shot at organizing the VW plant following the record contracts and strikes at the Detroit automakers, which launched Fain to international prominence as the face of the union last year.

United Auto Workers President Shawn Fain during an online broadcast updating union members on negotiations with the Detroit automakers on Oct. 6, 2023.
Screenshot

The UAW’s record contracts with the three major Detroit automakers is the biggest difference between the current union drive and previous efforts at Volkswagen, said Stephen Silvia, author of “The UAW’s Southern Gamble: Organizing Workers at Foreign-Owned Vehicle Plants.”
“This is by far the best chance for the UAW out of all its drives at Chattanooga,” he said.

Silvia, a professor at American University in Washington, D.C., said the political circumstances, company messaging, and Fain’s leadership all created a more favorable environment for the union than it had during previous organizing drives.
Volkswagen, which has union workers at non-U.S. plants, has said it will let its workers determine whether to organize. The company said it has only acted to clarify information it felt was misleading or incorrect related to issues such as wages and benefits, but it has not publicly opposed union organizing. It also launched a campaign called “Vote for the workplace you want,” encouraging all employees to do so.
“We respect our workers’ right to a democratic process and to determine who should represent their interests,” VW said in a statement. “We fully support an NLRB vote so every team member has a chance to a secret ballot vote on this important decision. Volkswagen is proud of our working environment in Chattanooga that provides some of the best paying jobs in the area.”

An aerial view of the Chattanooga Volkswagen factory in Chattanooga, Tennessee on April 10, 2024. 
Kevin Wurm | The Washington Post | Getty Images

In addition to less political pressure in the right-to-work state, there are also fewer organized efforts against the union than during prior drives. One group called “VW Chatt workers, for VW Chatt workers” in recent weeks started opposing UAW organizing, including a “Still No UAW” website.
A member of the group who asked not to be identified due to repercussions if UAW organizing is successful said he fears the union could cause problems at the plant, including the possibility of layoffs as if workers win more benefits during negotiations.
The assembly employee, who has more than 10 years at the plant, said it’s not guaranteed that the German automaker will agree to the same wages and benefits as GM, Ford and Stellantis.
“The Big Three, they got a decent contract … but we’re not the Big Three,” said the veteran worker. “They’re bigger companies [in the U.S.] and when contracts come into play with negotiations, it’s not going to be the same.”
He said this UAW organizing drive feels different than the past two because there is less outside political pressure, the union has new leadership and organizing tactics and more new workers are supporting the union at the plant.
VW workers filed for the election in March after a supermajority of them signed union cards, according to the UAW. The VW workers reached a majority in early February — two months after launching their public campaign to join the UAW.
Unlike prior organizing efforts, the union is using a grassroots, or bottom-up, drive led by workers at the plant rather than leaders at the international union. The strategy has helped messaging, Silvia said.
In 2019, VW workers at the Chattanooga plant rejected union representation in an 833-776 vote.
“Right now, we just need a voice in the plant. Right now, we’re subject to the whims of the company,” said Isaac Meadows, an assembly worker who has been at the VW plant for 14 months. “There are a lot of issues that we want to have a say in, and by coming together to form our union, it puts us in a position to bargain all that stuff.”
Meadows said he makes $27 an hour and that his top priorities are pay, benefits and additional time off.
VW production workers at the plant earn between $23.40 per hour and $32.40 per hour, with a four-year ramp up to top wages, according to the company.

UAW signs and water bottles are shown inside the I.B.E.W. building in Chattanooga, Tennessee on April 10, 2024. 
Kevin Wurm | The Washington Post | Getty Images

UAW-negotiated wages this year for the Detroit carmakers range between about $25 an hour and $36 an hour for production workers, including estimated cost-of-living adjustments. By the end of the UAW contracts in 2028, top wages are expected to surpass $42 an hour for production workers.
“The guy building the Ford Explorer, he’s worth about double to Ford as to what we are to Volkswagen,” said Meadows. He added that “everybody was watching” the outcome of the UAW’s talks with the Detroit automakers.
The UAW has used the new wages and other benefits as rallying calls for non-organized auto workers to join the union.
VW is one of 13 non-union automakers in the U.S. that the UAW set its sights on late last year after securing record contracts with the Detroit automakers. The drive covers nearly 150,000 autoworkers across BMW, Honda, Hyundai, Lucid, Mazda, Mercedes-Benz, Nissan, Rivian, Subaru, Tesla, Toyota, Volkswagen and Volvo.
Factory workers at Mercedes Benz’s assembly plant in Alabama earlier this month filed NLRB paperwork for a formal election to join the UAW.
“The first thing you need to do to win is to believe that you can win,” Fain told Mercedes-Benz workers last month. “That this job can be better. That your life can be better. And that those things are worth fighting for. That is why we stand up. That’s why you’re here today. Because deep down, you believe it’s possible.”
Fain previously vowed to move beyond the Big Three and expand to the “Big Five or Big Six” by the time its 4½-year contracts with the Detroit automakers expire. More

A whistleblower last week said that Boeing’s 787 assembly put excessive stress on airplane joints that could reduce some of the planes’ lifespans.
The whistleblower, Sam Salehpour, is scheduled to appear at a Senate hearing on Wednesday.
Boeing has denied the allegations and defended the quality and safety testing on its 787 Dreamliner and 777 aircraft.

An employee works on the tail of a Boeing Co. Dreamliner 787 plane on the production line at the company’s final assembly facility in North Charleston, South Carolina.
Travis Dove | Bloomberg | Getty Images

Boeing on Monday defended the quality and safety testing on its 787 Dreamliner and 777 aircraft, days after one of the company’s engineers went public with allegations that the plane-maker took “shortcuts” to speed up production of the planes.
The whistleblower, Sam Salehpour, last week said that Boeing’s 787 assembly put excessive stress on airplane joints that could reduce some of the planes’ lifespans. Boeing denied the allegations, calling them “inaccurate” and said it stood by the planes’ safety.

Salehpour is scheduled to appear along with another whistleblower who worked at Boeing, a former aviation official and an independent safety expert at a Senate hearing on Wednesday about aircraft safety called “Examining Boeing’s Broken Safety Culture: Firsthand Accounts.”
Salehpour’s claims come as Boeing navigates intense scrutiny after a door plug blew out of a 737 Max plane in January. The narrow-body aircraft is Boeing’s bestseller, and the blowout at 16,000 feet put passengers inches from tragedy. Since the accident the Federal Aviation Administration has blocked Boeing from increasing production of that plane.
In a roughly two-hour presentation with reporters on Monday, two Boeing engineering managers detailed the company’s stress and safety tests for the 787, which include testing the plane for 165,000 cycles, each meant to provide an equivalent of a flight, with varying conditions. In addition, the fuselage skin was struck by a 300-pound pendulum, the engineers said.
Steve Chisholm, chief engineer for Boeing’s mechanical and structural engineering, said Boeing created damage to fuselage panels in intense tests that were repeated more times than what aircraft would experience in service, “and the damage didn’t grow.”
Salehpour’s allegations relate to tiny spaces where pieces of the 787’s carbon composite fuselage meet. He said Boeing used force to join the pieces together and didn’t properly measure the gaps. He and his lawyers sent a letter to the FAA in January detailing his allegations, and the agency is investigating.

The whistleblower said on a call with reporters last week that he “literally saw people jumping on the pieces” of the 777 “to get them to align.” Boeing later that day said those claims are inaccurate and that it is “fully confident in the safety and durability of the 777 family.”
Boeing previously suspended deliveries of the 787 for nearly two years until August 2022 because of incorrect spacing on some portions of the fuselage of the planes.
“These claims about the structural integrity of the 787 are inaccurate and do not represent the comprehensive work Boeing has done to ensure the quality and long-term safety of the aircraft,” the plane-maker said in a statement in response to the claims. “The issues raised have been subject to rigorous engineering examination under FAA oversight. This analysis has validated that these issues do not present any safety concerns and the aircraft will maintain its service life over several decades.”
Salehpour’s lawyers also allege that Boeing retaliated against him after he voiced his concerns by excluding him from meetings and moving him off of the 787 program and onto the company’s 777 plan.
Boeing last week declined to comment on those specific allegations, citing the FAA’s ongoing whistleblower investigation, but said, “Retaliation is strictly prohibited at Boeing.”
The company is scheduled to report quarterly results on April 24, when it will face investor questions about aircraft safety, production rates and FAA oversight.

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Peloton has quietly removed the unlimited free-membership tier for its app less than a year after it debuted.
The fitness company, known for its Bike and Tread, offered the free-membership tier to bring in new customers but too few of them were converting into paid users.
“That free tier was cannibalizing our funnel and conversion to free trial and then to pay,” finance chief Liz Coddington said at a Morgan Stanley conference in March.

A stationary bicycle inside of a Peloton store is pictured in the Manhattan borough of New York City, U.S., January 25, 2022. 
Carlo Allegri | Reuters

Peloton has quietly removed its unlimited free-membership tier on its fitness app less than a year after it debuted because the initiative was failing to convert users into paid subscribers, the company said. 
Peloton dropped the free option for new users, once a key part of the business’s growth strategy, within the past few weeks. People who signed up for the company’s unlimited free membership before it was removed will continue to have access to it, Peloton said.

New users who are looking to work out with the company’s app now only have access to two tiers that cost $12.99 a month or $24 a month, with the option of a seven-day free trial. 
Last May, Peloton debuted a splashy rebrand that billed the business as a fitness company for all, and put its digital app at the center of its marketing campaign. The rebrand brought a new, tiered app strategy that included the unlimited free-membership option and two other paid levels that all had varying levels of content.
The rebrand came as CEO Barry McCarthy looked to transform Peloton from one focused on its hardware to a business that was equally as invested in its app. As sales steadily declined at the company, he was working to capture new customers who may have been intrigued by the brand but weren’t willing to shell out thousands for its equipment. 
McCarthy, a former Netflix and Spotify executive, had long wanted a free tier on the company’s app. He had bet that free users would fall in love with Peloton’s content and then spring for a paid membership, which comes with a far wider variety of classes, after they tried the app and decided they wanted more. 
The bet appears to have been a bust.

McCarthy told investors in November that the relaunch had been “less successful at engaging and retaining free users and converting them to paying memberships” than the company had expected.
Soon after, the unlimited free tier was no longer available. 
During a Morgan Stanley conference in March, finance chief Liz Coddington said the company “quickly” learned that the free tier was “cannibalizing” efforts to convert free-trial members to paid subscribers, which led the company to shift to a free-trial model. 
“It’s important to know that our app is still a work in progress. We still have a lot of opportunities to improve it,” said Coddington. “What we found is that we need to figure out ways to better engage them during the trial period, that they convert to paid and then also keep them engaged over time, so that they will retain at a higher rate. … When we do that, we believe that our marketing efficiency will improve, both because we’ll have better retention and better conversion rates.” 
While app subscribers declined during Peloton’s fiscal second quarter ended Dec. 31, Coddington said the company still “believe[s]” in its app strategy and it remains “an important part of the business.” 
Shares of Peloton fell more than 6% Monday and were down more than 45% this year, as of Friday’s close. The company’s market cap has shrunk to about $1.2 billion, a fraction of the $47 billion it was worth at the height of Peloton’s success during the Covid-19 pandemic.

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UnitedHealth Group’s first-quarter earnings report could offer a window into the financial impact of the February cyberattack on its Change Healthcare subsidiary.
The outage of the billing and payments processing unit has pushed physician groups to take out loans to meet the costs of managing their practices.
The disruption of real-time data on medical cost trends among seniors will cause greater uncertainty for Medicare Advantage health insurers, as they prepare bids for 2025 plans due in June.

UnitedHealth Group’s first-quarter earnings report Tuesday will mark the health-care giant’s first major public comments since a cyberattack on its Change Healthcare billing and payments subsidiary in February, which has led to the largest disruption in U.S. health care since the Covid pandemic.
“Everybody looks to United as the bellwether of all of health-care services. This will be different,” said Lisa Gill, managing director and health care analyst at JPMorgan.   

The data breach at the Change Healthcare unit forced the firm to take down its massive billing and payment processing service. While the company has restored services for pharmacies, the outage has continued to disrupt operations for health-care providers across the country.
Change Healthcare is a subsidiary of UnitedHealth’s sprawling Optum division, which includes 90,000 doctors under the Optum Care unit and one of the nation’s largest pharmacy benefits managers, OptumRx.
Analysts will be looking for how the company accounts for the costs associated with the cyberattack as well as the impact of the outage on other operations within Optum’s businesses.
“We will be very interested in the charge that they’re going to be incurring … in terms of how they’re estimating either lost revenue or additional expenses,” said Scott Fidel, managing director and health-care analyst at Stephens.
UnitedHealth said it has provided $4.7 billion in no-interest loans to providers, though the American Medical Association said more than half of physician groups surveyed in early April said they’d had to use personal loans to maintain operations.

One such physician, Nashville dermatologist James Allred, said he’s had to take out loans to keep his practice, Wellskin Dermatology & Aesthetics, afloat because he’s been unable to get claims processed and paid by private health insurers. The last six weeks have forced him to give up on plans to expand his practice this year.
“For one single hack to disrupt the entire American health-care industry… brings a lot of questions about how healthy is it, from a system standpoint, to have this massive consolidation?” Allred said.
Larger providers, such as home infusion services firm Option Care Health, have also warned that the outage could impact their quarterly results.

Medicare Advantage uncertainty  

On the health insurance side, the timing of the Change hack has increased uncertainty for UnitedHealthcare and rivals such as Humana, CVS Health’s Aetna and Elevance, which reports its quarterly results Thursday.
All of the Medicare Advantage insurers reported higher-than-expected medical utilization rates among seniors during the fourth quarter.
With the Change outage taking place midway through the first quarter, it has likely made it more difficult for insurers to track medical utilization costs in real time. JPMorgan’s Gill expects most will report adjusted or estimated numbers.
“We’re going to have to wait for the second quarter to really get a better idea as to what’s happening with medical cost trend for United and most likely for the industry,” said Gill.
The delayed outlook on medical costs will also raise the stakes for the health insurers as they prepare 2025 Medicare Plan bids, which are due in early June. It comes after disappointing government payment rate increases for 2025, announced earlier this month, which are expected to pose a profit headwind.  
“We’ve got elevated cost trends. We’ve got still … a pretty competitive market,” said Gill. “So, they have to work through that.” More