Johnson & Johnson is raising its full-year profit forecast as drug sales outpace devices

Johnson & Johnson $JNJ raised its full-year profit guidance on Tuesday after drug sales climbed nearly 8% in the third quarter, outpacing its medical device business and beating Wall Street expectations on the bottom line.

The company now expects full-year adjusted earnings of $11.05 to $11.15 per diluted share, up from a prior range of $10.96 to $11.11, the company said. It also lifted its reported sales guidance to a range of $101 billion to $101.4 billion. Third-quarter adjusted earnings came in at $2.59 per share. Analysts had penciled in $2.53 per share on average, according to the Associated Press. On the top line, the company's reported revenue of $25.4 billion came in just below the $25.44 billion consensus figure, according to the Associated Press.

J&J's Innovative Medicine segment — its pharmaceutical business — posted worldwide reported sales of $16.76 billion in the quarter, a 7.7% increase from a year earlier. Key drivers included strong growth in cancer drugs DARZALEX, CARVYKTI, and TECVAYLI, as well as the autoimmune drug TREMFYA and the psychiatric drug CAPLYTA, the company said.

The MedTech segment grew at a slower pace, with worldwide reported sales of $8.64 billion, up 2.5% from the prior year. Chief Financial Officer Joe Wolk said the company isn't satisfied with that performance. "Medtech needs to improve quite frankly," Wolk told Bloomberg. He pointed to geopolitical tensions and budget-cutting by some European governments as headwinds for the company's international device business, according to Bloomberg.

As part of efforts to sharpen the MedTech portfolio, J&J is preparing to separate its orthopedics business. Wolk said the company is "leaning towards a straight spin" rather than a sale. "We think that's the greatest way to create value, and that's likely the path going forward," he told Bloomberg.

On a GAAP basis, net earnings fell sharply to $210 million, or $0.09 per diluted share, from $5.15 billion, or $2.12 per diluted share, in the same quarter a year ago, the company said. The decline reflects special items and other charges excluded from the adjusted figures.

Chief Executive Officer Joaquin Duato pointed to the quarter's performance as evidence of the company's direction. "This progress, together with strategic investments in high-growth areas, gives us clearer line of sight to double-digit growth by the end of the decade," Duato said in a statement.

J&J stock slipped less than 1% in premarket trading on Tuesday.