J&J Profit Beats Forecast, But Drug Sales Dim

Johnson & Johnson Tuesday posted second-quarter earnings that beat Wall Street expectations, as strong demand for its medical devices and consumer products overshadowed negligible growth of prescription drugs.

johnson_Johnson_earnings1.jpg
Click to get more earnings info

The diversified health-care company, whose shares rose 1.1 percent in premarket trading, said it earned $3.3 billion, or $1.17 per share, in the quarter.

That compared with $3.08 billion, or $1.05 per share, in the year-earlier period.

Excluding special items, the company earned $1.18 per share.

Analysts, polled by Reuters Estimates, on average had expected $1.12 per share.

J&J raised its 2008 earnings forecast, excluding special items, to between $4.45 and $4.50 per share, from its earlier view of $4.40 to $4.45 per share.

Quarterly sales rose 8.7 percent to $16.45 billion, above the $16 billion Reuters Estimates had forecast.

They would have risen only 3.1 percent if not for the weak dollar, which boosts the value of overseas sales when converted back into U.S. currency.

"Revenue and earnings came in well above what we were looking for and what the street was," said Jeff Jonas, portfolio manager with Gabelli Healthcare and Wellness Trust.

"The strength really came in the device and the consumer businesses."

Edward Jones analyst Linda Bannister said overall drug sales, however weak, were better than expected, as declines for J&J's Procrit anemia drug and Risperdal schizophrenia treatment were not as extreme as feared.

"Overall, it was a pretty solid quarter for J&J, with a good beat versus earnings expectations despite a challenging environment for the company," Bannister said.

Sales of medical devices rose 12.1 percent in the quarter to $6.1 billion, while sales of consumer products -- including Listerine mouthwash and other brands recently acquired from Pfizer -- rose 13.2 percent to $4.0 billion.

But global sales of prescription drugs grew only 3.1 percent to $6.3 billion and would have fallen 1.3 percent if not for favorable foreign exchange factors.

Drug sales were dragged down by shrinking demand for Procrit, which has been hurt by safety concerns, and generic competition outside the United States for Risperdal.

Combined sales of Procrit and a similar anemia treatment called Eprex sold overseas fell 14 percent to $652 million.

Risperdal sales fell 16 percent to $712 million.

Johnson & Johnson has long been accustomed to double-digit annual earnings growth from its array of drugs, medical devices and consumer products.

But it is expecting only single-digit growth this year, largely due to generic U.S. competition that began recently for Risperdal.

The company's longtime biggest product, and an injectable long-acting form of the medicine known as Risperdal Consta, last year had sales of $4.5 billion.

Moreover, J&J is girding for expected arrivals next year of generic forms of its $2.5 billion-a-year Topamax epilepsy medicine.

"The pharmaceutical business is going to get weaker in the second half, so that's going to be more challenging," Gabelli's Jonas said.

"But if they can keep up the device and consumer momentum they should be able to offset that."

J&J shares were up 74 cents at $67.15 in premarket trading.