Johnson & Johnson beats 4Q profit views despite lower sales
Johnson & Johnson posted a 28 percent jump in fourth-quarter profit, beating Wall Street expectations, as the sale of part of its now-restructuring medical devices business offset the strong dollar and multiple charges. The results pushed up shares of the Dow component more than 3 percent.
J&J's consumer business, hammered by an embarrassing stretch of dozens of recalls dating to 2009, finally has nearly all its products back in stores, the company said. However, its prescription drugs segment turned in the best performance and was the only segment with higher sales.
The world's biggest health care product company said on Tuesday that net income was $3.2 billion, or $1.15 per share, up from $2.53 billion, or 89 cents per share, a year earlier. Adjusted net income was $4.04 billion, or $1.44 per share, which was 2 cents better than Wall Street analysts expected, according to Zacks Investment Research.
J&J posted a $1.21 billion gain, mainly for its October divestiture of its Cordis heart devices unit. Cordis had accounted for about a quarter of device sales.
Revenue for the maker of baby shampoo, prescription medicines and medical devices fell 2.4 percent to $17.81 billion, hurt by the dollar that has weighed on other U.S. multinationals as well. The total missed analyst projections for 17.94 billion.
"The quarter was pretty solid," said Edward Jones analyst Ashtyn Evans, adding that over the long term, profit will be driven more by launches of new prescription drugs than medical devices or consumer products. For example, she said recently approved Darzalex, for the blood cancer multiple myeloma, eventually could produce billions in annual sales.
Johnson & Johnson, based in New Brunswick, New Jersey, expects full-year adjusted earnings, which excludes one-time items, of $6.43 to $6.58 per share, with revenue of $70.8 billion to $71.5 billion. Analysts were expecting $71.9 billion in sales and earnings of $6.37 per share.
"We're pleased with the results," CEO Alex Gorsky told analysts during a conference call. "We're optimistic about the opportunities in health care and the strength of our business."
He noted J&J plans by 2019 to apply for approval of 10 new products that each could generate $1 billion in annual sales.
Last week, Johnson & Johnson said it plans to restructure its underperforming medical devices business, which includes the reduction of about 3,000 jobs over the next two years.
Just a few years ago, medical device sales were surging and became J&J's top-grossing business. But those sales have been under strain of late, particularly for brands such as DePuy orthopedic implants and Ethicon surgical equipment.
Evans said the devices restructuring is a positive. She expects J&J to use the annual savings of $800 million to $1 billion it anticipates by 2018 for "attractive acquisitions" and internal product development.
In the U.S., J&J's biggest market, sales jumped 8 percent to $9.29 billion. But sales to other countries dropped 11.7 percent, to $8.52 billion, hurt by the strong dollar. It reduced by 12.9 percent the value of foreign sales, which are paid for in weaker local currencies.
Sales of prescription drugs rose 0.8 percent to $8.06 billion, led by strong sales of Remicade for rheumatoid arthritis, psoriasis treatment Stelara and Xarelto for preventing heart attacks and strokes.
Sales of consumer health products fell 7.9 percent to $3.32 billion. Sales of medical devices and diagnostic equipment fell 3.3 percent to $6.43 billion.
"It was a decent quarter, with the bad news in devices offset by good news in drug sales and the announced cuts in the devices businesses," noted Erik Gordon, a professor and pharmaceuticals analyst at University of Michigan's Ross School of Business. "All eyes will be on the pharma business and whether the big sellers can show consistent sales increases."
For all of 2015, J&J reported net income fell 5.6 percent to $15.41 billion, or $5.48 per share. Revenue dropped 5.7 percent to $20.07 billion.
In early afternoon trading, J&J shares rose $3.38, or 3.5 percent -- an unusually big jump for the giant company -- to $98.98.
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