The Impact of Market Conditions on Johnson and Johnson Financials
| Market Condition | Impact on Johnson and Johnson Financials |
| Interest rates | Interest rates manifest in the company in two ways. Firstly, Johnson and Johnson has to swap currencies whenever it encounters foreign exchange instability (Bloomberg, 2022). To that end, the company has gained since the U.S. dollar was strong compared to other foreign currencies. J&J did not lose revenue when the company did currency swaps in 2022 to stabilize its financial position. On the other hand, the company is affected by the Federal Reserve’s policy on interest rates (Bloomberg, 2022). To bring down inflation the Federal Reserve increased interest rates to tamp down inflation caused by the sinking of the Euro. |
| Exchange rate | The last few years have witnessed the strengthening of the U.S. dollar. Since Johnson & Johnson has a significant international market, strengthening the dollar significantly affects the company’s financial performance. As the dollar gains against local currencies, the cost of Johnson & Johnson’s medical products rises, scaring away buyers in these international markets. International buyers resort to buying from alternative companies offering relatively low prices. At home, the company’s share value in the stock market declines. For instance 2022, the share value was $1.33, representing a decline from the previous year (Johnson & Johnson, 2022). |
| Recession | A recession occurs when an economy declines, leading to fewer people willing to buy goods at their current prices. During COVID-19, many businesses closed, and the recession hit consequently. With more people losing jobs, their purchasing power was also badly hit. However, J&J was not affected by the recession in the past year as much as other companies were affected. The company has a diversified portfolio with three business segments: medical devices, pharmaceuticals, and consumer products. As other businesses were reeling from the impact of the recession, J&J did not suffer as much. For instance, while S&P shares fell up to 57%, Johnson & Johnson’s shares only fell by 35% at most. The idea is that if one business segment loses, it is compensated by another. |
| Inflation | Inflation also impacted Johnson and Johnson’s share performance. Particularly, inflation in China, coupled with the impact of COVID-19, led to a decline in the demand for J&J’s share performance in China. In the fourth quarter of 2022, J&J faced a decline in sales of COVID-19 vaccines in China due to inflation (Satija & Mishra, 2023). The outcome of the inflationary effect was a decline in earnings per share (EPS) of $1.33 by 24.9% (Satija & Mishra, 2023). Inflation also affected the company’s direct revenue. The target revenue was $6.2 billion, but the company only managed a paltry $5.8 billion.
Outside the U.S., J&J recorded sales worth $689 billion. It may look like a good performance, but its other products largely failed. The $689 billion constitutes stronger performance from COVID-19 vaccine sales. However, as COVID-19 sales drop, the company’s overall sales are expected to drop. |
References
Bloomberg. (2022, July 19). J&J Sees Sales, Profit Growth Diluted by Dollar’s Strength – BNN Bloomberg. BNN. https://www.bnnbloomberg.ca/j-j-sees-sales-profit-growth-diluted-by- dollar-s-strength-1.1793949
Johnson & Johnson. (2022). Johnson & Johnson Reports Q4 and Full-Year 2022 Results | Johnson & Johnson. Content Lab U.S. https://www.jnj.com/johnson-johnson-reports-q4-and-full-year-2022-results
Satija, B., & Mishra, M. (2023, January 24). J&J expects inflation. China COVID hit to carry into 2023. Reuters. https://www.reuters.com/business/healthcare-pharmaceuticals/jj-quarterly-profit-beats-pharmaceuticals-strength-2023-01-24/
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Question 
The Impact of Market Conditions on Johnson and Johnson Financials
My company is Johnson & Johnson****
In preparation for the Week 4 Summative Assessment, research your company’s financial reports from the past fiscal year and the market conditions from that same year.
In a 1- to 2-page chart, compare your company’s current financial reports with the market conditions from the previous fiscal year. Focus on interest rates, Federal Reserve Bank monetary policy changes, or other market conditions relevant to your selected company.