Global pharma giants Abbott Laboratories (NYSE: ABT) and Johnson & Johnson (NYSE: JNJ) announced their earnings for Q1 2020 last week. Despite being close peers facing a similar crisis situation they took different approaches in sharing information with investors during their earnings conference calls.
Longer conference call
The topics of discussion varied widely. Both JNJ and Abbott had sufficient time devoted to aspects of quarterly earnings and segment-wise results as usual. However, the former had a slightly more holistic discussion. The company executives talked about stepwise continuity action plans, which included financial decisions (M&A opportunities, capital allocation) and operational priorities (future product launches).
For example, JNJ’s conference call for this quarter lasted 102 minutes, which was almost 17 minutes longer than what it usually allots. The extra time was used to discuss in detail COVID-19 related subjects including the vaccine and impact on the operations. Meanwhile, Abbott’s call was only an hour long, in line with the duration of its past conference calls. It had a limited explanation to offer in its approach to capital allocation and financial decisions.
Importantly, COVID was mentioned only 16 times during Abbott’s entire conference call, which was five times lower than JNJ’s mentions. This comes in the backdrop of the Securities and Exchange Commission (SEC) publishing a statement encouraging maximum disclosure with investors on the COVID-19 impact.
JNJ and Abbott have leveraged their own strengths and core competencies to tackle COVID-19. JNJ has announced a lead vaccine candidate for COVID-19. Abbott, which is specialized in the Diagnostics business has worked on launching three test kits, each with a different value proposition. JNJ, meanwhile presented their future course of action and phase-wise timelines. Abbott had a rough outline chalked out, but lacked specific information to the extent that JNJ had mapped.
JNJ and Abbott with histories going back over 130 years, having seen the Great Depression and other financial crises, have past data to forecast implications of the recession on their performance. They have their financial modelling in place. But they have communicated differently.
JNJ was more open about future guidance. It aimed to strike a balance between transparency and accuracy while communicating estimates to its investors. To ensure transparency, it mentioned all the assumptions it had made in its modelling. It had exact or at least ballpark figures on 2020 revenues, earnings, segment-wise results. CFO Joseph Wolk said:
“We know some companies in our peer set have pulled their guidance. We also know that some sell side models have not been updated. We understand that may have been an option for us as well, but in uncertain times, we look forward to offering you as much transparency and credible insight into our view of our business.”
Abbott, on the other hand, had a different approach. From the statement of the CEO of Abbott, Robert Ford:
“It’s going to be very difficult to be able to get that right to the penny going forward. But I believe that we’ll be in a position to give, let’s say, some more qualitative update sometime in the quarter. And depending on how that goes, we might be able to give guidance in the second half here.”
Abbott was more conservative and only willing to share the shape of the curve (V shape recovery) based on the modelling, overall outlook on 2020, without many numerical projections.
(Written by Manjula S)
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