J&J posts 79 percent increase in fourth-quarter profit | VailDaily.com
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J&J posts 79 percent increase in fourth-quarter profit

Linda A. Johnson

TRENTON, N.J. – Health care conglomerate Johnson & Johnson posted a 79 percent increase in fourth-quarter profit Tuesday, mainly due to lower overhead costs and a large tax charge a year ago.While the earnings were in line with Wall Street expectations, revenue was below estimates, with domestic pharmaceutical sales down 10 percent. J&J shares fell nearly 3 percent.The maker of contraceptives, contact lenses, prescription drugs and baby and skin care products said that net income totaled $2.2 billion, or 73 cents per share, for the three months ended Dec. 31 versus $1.2 billion, or 41 cents a share, a year ago.The year-ago figures were depressed by a $789 million charge for repatriating foreign profits. J&J would have earned $2 billion, or 67 cents per share, without that charge.New Brunswick-based J&J said sales dipped to $12.61 billion, from $12.75 billion a year earlier, when the quarter had one additional week.”If this is a trend, it is not a friendly sign” to have revenues decline for such a large company, said health care analyst Steve Brozak of WBB Securities LLC.He noted a second concern: Most of J&J’s revenue growth has been coming from overseas, where profit margins are lower and marketing can be more difficult.Analysts surveyed by Thomson Financial were expecting earnings per share of 73 cents and revenues of $13.2 billion.The report was released as J&J faces a Tuesday night deadline to raise its bid or let rival Boston Scientific Corp. acquire heart device maker Guidant Corp. J&J officials refused to discuss the Guidant deal during a morning conference call with analysts, and J&J spokesman Marc Monseau said at noon that the company had no comment.”The silence was really deafening, given that everybody cares about one thing – Guidant,” said Brozak. “Above all, the future of J&J is dictated by what happens with Guidant.”Despite refusing to discuss the issue, he noted that J&J management repeatedly stressed the importance of its medical device segment as a future growth driver.Natick, Mass.-based Boston Scientific is offering about $27.2 billion, or $80 per share, for Indianapolis-based Guidant, whose board last Tuesday declared that bid superior to J&J’s last offer: $24.2 billion, or $71 per share.J&J forecast earnings between $3.78 and $3.85 for 2006, with revenue growth accelerating after the first quarter. Analysts are expecting full-year earnings of $3.79 per share. For the first quarter, the company forecast earnings per share of $1 to $1.02, less than the $1.05 analysts are expecting. Those figures exclude expensing of stock options, which J&J said should total 13 cents per share in 2006.”Our overall results in 2005 were solid,” partly due to cost cutting and increased sales of higher-margin products, said William Weldon, chairman and chief executive officer. “Our individual businesses are each well positioned for future growth.”J&J’s pharmaceutical segment revenue fell 10 percent in the United States and 6 percent worldwide in the fourth quarter, to $5.5 billion. By comparison, sales of medical devices and diagnostics grew nearly 4 percent to $4.8 billion and consumer product sales grew 2 percent to $2.3 billion.Independent pharmaceuticals analyst Hemant Shah of HKS & Co. said he was concerned by how poorly the pharmaceutical business performed after driving company revenue growth for the last half-dozen years. Until now, J&J generally has escaped loss of drug revenues to generic competition, he said.”Now it’s catching up,” and will eventually affect the bottom line as well as sales, Shah said. “That’s why I think it was very important that they own Guidant.”For the full year, J&J reported net income of $10.4 billion, or $3.46 per share, up from $8.5 billion, or $2.84 per share, a year earlier. Revenue for all of 2005 totaled $50.51 billion, up nearly 7 percent from $47.35 in 2004.Johnson & Johnson shares fell $1.83 to close at $59.36 on the New York Stock Exchange.Vail, Colorado


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