Johnson & Johnson reported better-than-expected third-quarter results, as strong growth for prescription drugs overshadowed weaker contributions from its medical device and consumer products businesses.
"The company's pharmaceuticals division is really well placed with lots of new drug launches at a time when the company is not facing many patent expirations on its other medicines," Morningstar analyst Damien Conover said. "And we expect to see more of this strength in the next several quarters." (Click here to get the latest stock quote.)
Global drug revenue jumped almost 10 percent to $7.04 billion, repeating the strong performance seen in the prior quarter, on soaring sales of its Simponi and Remicade treatments for rheumatoid arthritis, Stelara for psoriasis, its Zytiga drug for prostate cancer and other medicines.
(Read more: Inside Puerto Rico's looming debt threat)
But sales of the company's medical devices were hurt by patients' continuing reluctance to undergo elective surgeries and other procedures in a weak economy. Division sales fell 2 percent to $6.93 billion.
"The weakness in devices appears to be broad based, with not just one thing bringing them down," Edward Jones analyst Judson Clark said, adding that the unit's weakest category was medical diagnostics. All things considered, Clark said J&J is one of the best-performing companies in health care.
J&J's shares have risen almost 30 percent for the year to date, compared with a 17 percent gain for the ARCA Pharmaceutical Index of large U.S. and European drugmakers.
Chief Financial Officer Dominic Caruso, on a conference call with industry analysts on Tuesday, said there has been a pickup in overall economic activity, "but certainly not to the level we had hoped."
Caruso said J&J was interested in acquiring or licensing new prescription drugs to sustain strong growth of its top-performing business. He said J&J was also on the hunt for new medical devices, including those that treat structural heart defects, if they can be bought at reasonable prices.
(Read more: Returnship for older workers: Proceed with caution)
The diversified health-care company on Tuesday reported net earnings of $2.98 billion, or $1.04 per share, for the quarter. That compared with $2.97 billion, or $1.05 per share in the year-earlier period.
Excluding special items, J&J earned $1.36 per share. Analysts on average, had expected $1.32 per share, according to Thomson Reuters I/B/E/S. The company took special charges of about $900 million in the quarter, related largely to legal expenses and merger-related costs.
Sales of consumer products edged up 0.8 percent to $3.61 billion, held back by disappointing demand for oral care and wound-care products. Within the consumer division, sales of over-the-counter medicines rose 6.4 percent to $975 million, as recalled brands such as Tylenol and Motrin began returning to U.S. drugstore shelves.
J&J over the past three years has recalled dozens of OTC products made at its plants in Pennsylvania and Puerto Rico that were shown to have foreign particles or incorrect concentrations of active ingredients. Costly plant upgrades are still under way, as J&J strives to make the affected products at other plants.
Overall company sales rose 3.1 percent to $17.58 billion in the quarter, above Wall Street expectations of $17.46 billion, but would have risen 4.7 percent if not for the stronger dollar.
J&J said it expects earnings this year, excluding special items, of $5.44 to $5.49 per share, up from its prior view of $5.40 to $5.47. The company earned $5.10 per share last year.