Johnson & Johnson Plans to Cut Roughly 3,000 Jobs in Medical Devices

Johnson & Johnson (NYSE: JNJ) is looking to save some money over the next few years and as a result it is taking action by restructuring its Medical Devices businesses. Ultimately Johnson & Johnson is undertaking actions to strengthen its go-to-market model, accelerate the pace of innovation, further prioritize key platforms and geographies and streamline operations while maintaining high-quality standards.

The actions are expected to result in annualized pretax cost savings of $800 million to $1 billion, the majority of which is expected to be realized by the end of 2018, including approximately $200 million in 2016.

The company expects to record pretax restructuring charges of approximately $2.0 billion to $2.4 billion, which will be treated as special items, of which approximately $600 million will be recorded in the fourth quarter of 2015.

Johnson & Johnson confirmed the full-year 2015 guidance it provided on October 13, 2015, for sales of $70.0 billion to $71.0 billion and $6.15 to $6.20 in earnings per share (EPS) for the full year, which excludes special items such as restructuring charges. Consensus estimates for the full year call for $6.18 in EPS on $70.13 billion in revenue.

However, in order to realize these cost synergies, the company will have to cut roughly 4% to 6% of the Medical Devices segment’s global workforce over the course of the next two years. This totals roughly 3,000 jobs.
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Gary Pruden, Worldwide Chairman, Johnson & Johnson Medical Devices, commented:

As a market leader, we are committed to leveraging our breadth and scale to shape the future of the medical device industry, for the benefit of those we serve. The bold steps we are taking today are to evolve our offerings, structure and footprint and increase our investment in innovation. These actions recognize the changing needs of the global medical device market and will deliver more value to customers, increasing our competitive advantage and driving growth and profitability for our business.

Shares of Johnson & Johnson were trading up 0.6% at $97.57 on Tuesday, with a consensus analyst price target of $108.00 and a 52-week trading range of $81.79 to $105.49.