Pharmaceutical giant Johnson & Johnson (JNJ) Tuesday said its fourth-quarter profit declined from the previous year due to a hefty restructuring charge, despite a 9% increase in revenues. Adjusted for items, earnings topped Wall Street view. Looking ahead, the company issued earnings forecast for fiscal 2010 within analysts' estimates.
Net earnings for the quarter declined to $2.206 billion or $0.79 per share from $2.714 billion or $0.97 per share in the previous year.
The latest results included an after-tax restructuring charge of $852 million and an after-tax gain of $212 million representing the net impact of litigation matters. In the previous year, net earnings included special items related to in-process research and development charges of $141 million with no tax benefit and an after-tax gain of $229 million representing the net impact of litigation matters.
Excluding special items, fourth-quarter net earnings were $2.846 billion or $1.02 per share in 2009. In the previous year, adjusted quarterly net earnings were $2.626 billion or $0.94 per share.
On average, 16 analysts polled by Thomson Reuters expected the company to earn $0.97 per share for the quarter. Analysts' estimates typically exclude special items.
The New Brunswick, New Jersey-based company is engaged in the research and development, manufacturing and sales of various healthcare products and has over 250 operating companies. Founded in 1886, the company operates in three segments - Consumer, Pharmaceutical and Medical Devices & Diagnostics.
The company's sales for the quarter increased 9% to $16.551 billion from last year's $15.182 billion. Operational growth was 4.5% and currency contributed 4.5%. Analysts expected quarterly revenues to be $15.70 billion.
The maker of Acuvue contact lenses and Band-Aids is grappling with the economic crisis as well as generic competition that have led to a decline in its revenues. The company's blockbuster drugs, the antipsychotic drug Risperdal and epilepsy treatment Topamax, are finding it hard to take on competing generic versions. Risperdal lost patent exclusivity in 2008 and Topamax lost U.S. patent exclusivity in March 2009. The drug maker has been trying to offset the effects of generics by sprucing up its other products, mainly vaccines.
In Consumer segment, sales rose to $4.249 billion from $3.855 billion generated last year. Operational growth of 2% stemmed mainly from skin care products Neutrogena, Aveeno and Dabao, as well as international sales of Listerine antiseptic mouthrinse and Splenda No Calorie Sweetener.
Pharmaceutical segment brought in $5.993 billion in sales in the latest quarter, up from last year's $5.685 billion. Strong operational growth was shown by pain management drug Remicade, HIV treatment Prezista, multiple myeloma drug Velcade and antipsychotic medication Risperdal Consta Long-Acting Treatment.
The company noted that sales results of migraine treatment Topamax and antipsychotic medication Risperdal were hurt by generic competition.
In the Medical Devices & Diagnostics segment, sales in the quarter improved to $6.309 billion from $5.642 billion reported for the fourth quarter of 2008. In this segment, primary contributors to operational growth of 4.2% included Ethicon's surgical care and aesthetics products; DePuy's orthopaedic joint reconstruction, spine, and sports medicine businesses; Ethicon Endo-Surgery's minimally invasive products and Ortho-Clinical Diagnostics' professional products. However, the Cordis franchise reported lower sales, reflecting continued competition in the drug-eluting stent market.
Region-wise, U.S. sales improved to $7.867 billion from the prior year's $7.667 billion. International sales in the quarter totaled $8.684 billion, compared to $7.515 billion in the previous year.
Cost of products sold increased to $5.312 billion from $4.372 billion in the prior year. The company incurred restructuring expense of $1.073 billion in the latest quarter.
In last November, the healthcare giant had announced elimination of 6%-7% of its global workforce, as part of its global restructuring initiatives. The restructuring initiatives are targeted to achieve $1.4 billion-$1.7 billion in cost savings when fully implemented in 2011, with $800 million - $900 million expected to be achieved in 2010. Effective tax rate reduced to 15.3% from the previous year's 22.8%.
For the third quarter, Johnson & Johnson's net income grew to $3.35 billion or $1.20 per share from $3.31 billion or $1.17 per share in the same quarter last year. Quarterly sales declined to $15.1 billion from $15.9 billion in the previous year.
For the full year, net earnings dropped to $12.266 billion or $4.40 per share from $12.949 billion or $4.57 per share in 2008. Excluding special items, full year net earnings totaled $12.906 billion or $4.63 per share. Sales declined to $61.897 billion from last year's $63.747 billion.
While announcing the third-quarter results in October 2009, Johnson & Johnson had lifted its earnings per share outlook for full year 2009 to $4.54 - $4.59 from its prior range of $4.45 - $4.55, excluding the impact of special items, which the company maintained in November 2009. For the full year, analysts expected earnings of $4.58 per share on revenues of $61.05 billion.
Looking ahead, the company expects full year 2010 earnings of $4.85-$4.95 per share, excluding the impact of special items. Analysts look for 2010 earnings of $4.85-$5.06 per share.
Among other large pharmaceutical companies, Pfizer Inc. (PFE) is slated to announce fourth-quarter results on February 3. Analysts look for earnings of $0.50 per share on revenues of $15.94 billion.
Procter & Gamble Co. (PG) is expected to announce second-quarter results on January 28. Wall Street expects earnings of $1.43 per share on revenues of $21.07 billion.
JNJ is currently trading at $62.56, down $0.66 or 1.04% on a volume of 1.038 million shares. For the past year, the stock traded in the range of $46.25-$65.95.
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