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Johnson & Johnson Beats, But Guidance Light

Johnson & Johnson reported higher-than-expected quarterly earnings, but took big charges for product recalls, and the diversified healthcare company forecast 2012 earnings below analysts' estimates amid continuing weak U.S. sales and the negative impact of the stronger dollar.

Johnson & Johnson
AP
Johnson & Johnson

The health care conglomerate delivered fourth-quarter earnings excluding items of $1.13 per share, up from $1.03 per share in the year-earlier period.

The maker of Tylenol, prescription drugs and medical devices said net income was $218 million, or 8 cents per share, down from $1.94 billion, or 70 cents a share, a year earlier. Several charges dragged down net income income.

Revenue was $16.3 billion, an increase from $15.64 billion a year ago.

Analysts had expected the company to report earnings excluding items of $1.09 per share on revenue of $16.28 billion, according to Thompson Reuters.

The company's full-year earnings guidance excluding items of $5.05 to $5.15 per share was a bit below Wall Street expectations.

After the announcement, shares of the company erased earlier losses and turned flat in pre-market trading.

The company's DePuy Orthopedics unit issued a massive recall of its "metal-on-metal" hips in 2010 after they shed metal fragments, causing disabling injuries. The devices were developed to be more durable than traditional implants that combined metal and polyethylene for their ball-in-socket structure.

The costly recalls came even as J&J began massive recalls of dozens of consumer medicines, including its Tylenol and Motrin painkillers, due to quality lapses at its factories. Shortages of the products continue as J&J, under close U.S. supervision, attempts to upgrade a key plant in Fort Washington, Pennsylvania.

Chief Executive Officer William Weldon said on Tuesday that he expected the plant to reopen next year and for J&J to re-introduce important recalled products during 2012 that are being made elsewhere.

"We feel positive about our consumer medicines going into 2012," he told analysts on a conference call.

"Results were pretty much in line, with some pretty big charges, but the forecast is a little weak for 2012," said Morningstar analyst Damien Conover.

J&J spokesman William Price said most analysts had not yet factored the negative impact of the stronger dollar into their forecasts.

"Adjusting their estimates for the currency impact, 2012 guidance is in line with the analyst expectations," Price said.

J&J said global sales rose 3.9 percent in the fourth quarter to $16.26 billion, slightly below Wall Street's average forecast of $16.27 billion. But U.S. sales of its medical devices and prescription drugs slumped, as they did in the prior quarter.

Worldwide sales of over-the-counter medicines, shampoos and other consumer products edged up 1.6 percent to $3.67 billion, held back by continued shortages of consumer drugs that have been recalled.

Global sales of J&J prescription drugs rose 6.7 percent to $6.09 billion. But sales fell 8.3 percent in the United States, where the company's Levaquin antibiotic is now facing competition from cheaper generics.

Worldwide sales of medical devices rose 2.7 percent to $6.49 billion.

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