Johnson & Johnson (JNJ: Quote) Tuesday reported a sharp decline in its second-quarter profit, hurt by significant charges, while adjusted earnings increased and topped the Street projections. The company's nearly flat revenues, which were below estimates, reflected negative currency movements and generic competition in the domestic market, despite the benefits from the recent acquisition of orthopaedic firm Synthes, Inc.
Further, the company trimmed its fiscal 2012 adjusted earnings forecast, below estimates, reflecting the negative impact of recent currency movements.
In the second quarter, the company's operational results increased 3.5 percent, but were more than offset by the negative currency impact of 4.2 percent. Domestic sales decreased 1.2 percent. International sales edged down mainly due to negative currency impact. The company said the recently acquired Synthes contributed 1.2 percent to worldwide operational sales growth.
Negative currency movements in the Consumer segment were partly offset by positive international sales of oral care products, Neutrogena skin care products and international baby care products.
In the Pharmaceutical division, sales edged up on higher overseas sales, despite a decline in its home market. The results were benefited by strong sales for inflammatory diseases drug Remicade, HIV drug Prezista as well as sales of recently launched products.
JNJ's recently launched products that made good results include prostate cancer drug Zytiga, schizophrenia drug Invega Sustenna/Xeplion, chronic hepatitis C drug Incivo, plaque psoriasis treatment Stelara and oral anticoagulant Xarelto.
Meanwhile, the home market's performance was negatively impacted by generic competition for Levaquin, a treatment for bacterial infections, and the manufacturing suspension at a third party supplier for Doxil /Caelyx, a medication to treat ovarian and other cancers.
Chief Executive Officer Alex Gorsky said, "Our pharmaceutical pipeline continued its strong momentum this quarter with the submission of several new drug applications, as well as strong growth from several recently launched products that meet critical patient needs."
For the second quarter, net earnings decreased 49.3 percent to $1.41 billion and earnings per share fell 50 percent to $0.50.
The latest results were hurt by special items of $2.2 billion, including non-cash charges primarily related to a partial write-down of certain assets related to the Crucell vaccines business, an increase in the accrual for the potential settlement of previously disclosed civil litigation matters, and costs related to its $19.7 billion acquisition of Synthes. The prior-year's results included charges of $772 million.
Adjusted net earnings, which excluded one-time items, rose 2.7 percent to $3.64 billion and adjusted earnings per share grew 1.6 percent to $1.30. On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $1.29 per share for the quarter. Analysts' estimates typically exclude special items.
Sales to customers edged down 0.7 percent to $16.48 billion and fell below Wall Street analysts' consensus estimate of $16.69 billion.
Looking ahead for fiscal 2012, Johnson & Johnson now expects adjusted earnings in the range of $5.00 to $5.07 per share, compared to previous forecast of $5.07 to $5.17 per share. The negative impact of recent currency movements were partially offset by the positive contribution from the Synthes acquisition. Analysts expects the company to report earnings of $5.14 per share for fiscal 2012.
In pre-market activity, JNJ shares are currently at $67.88, down $0.57 or 0.83 percent.
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by RTT Staff Writer
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