J&J Beats, Guidance Disappoints – Analyst Blog

Posted on 01/26/10 at 10:15am by Zacks

Johnson & Johnson (JNJ) reported fourth quarter earnings of 79 cents, which was impacted by a restructuring charge. However, excluding extraordinary items, the company’s earnings per share came in at $1.02, surpassing the Zacks Consensus Estimate of 97 cents and 94 cents from the year-ago period.

The company reported revenues of $16.6 billion, an increase of 9% compared to the fourth quarter of 2008. Operational factors and foreign exchange movement contributed equally to the growth. Sales in domestic and international markets recorded an increase of 2.6% and 15.6% respectively.

For the full year of 2009, Johnson & Johnson recorded a 1.8% year-over-year increase in earnings per share to $4.63. However, revenues were $61.9 billion, a decline of 2.9% compared to the prior year period.

Johnson & Johnson’s diversified business model is helping it to navigate through tough situations. During the fourth quarter, the three business segments of the company – Consumer, Pharmaceuticals and Medical Devices & Diagnostics recorded a growth of 10.2%, 5.4% and 11.8%, respectively. For the third quarter in a row, the medical devices segment posted higher revenues than the pharmaceuticals segment.

For the full year, the pharmaceuticals segment’s revenue declined 8.3%, mainly due to operational factors (6.1%) and the negative impact of foreign exchange movement (2.2%). Both domestic and international sales declined 12.1% and 2.6%. While, drugs such as Topamax and Risperdal were negatively impacted by generic competition, products such as Remicade, Prezista and Velcade recorded strong operational growth.

While full-year revenues from medical devices recorded an increase of 1.9%, revenues would have been higher but for the negative currency impact of 2.3%. Domestic sales increased 4.5% with international sales declining by 0.2%.

Primary contributors to growth include Ethicon’s surgical care and aesthetics products; Ethicon Endo-Surgery’s minimally invasive products; DePuy’s orthopaedic joint reconstruction, spine, and sports medicine businesses; and Ortho-Clinical Diagnostics’ professional products, partially offset by lower sales in the Cordis franchise.

During the quarter, Johnson & Johnson decided to acquire a privately-held medical devices company, Acclarent, for approximately $785 million. Acclarent develops devices to treat abnormalities associated with ear, nose and throat (ENT), specializing in products used for sinus surgery. We believe there is huge potential for Acclarent’s business, as its balloon sinuplasty technology and other related products offer ENT patients a better alternative compared to currently available treatment options including conventional surgical approaches.

Johnson & Johnson’s guidance for 2010 is slightly disappointing with earnings per share expected in the range of $4.85 – $4.95. The current Zacks Consensus Estimate of $4.94 is already towards the upper end of this range. Shares were down 1% following the release of fourth quarter results. We are Neutral on the stock.
Read the full analyst report on “JNJ”
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Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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