Johnson and Johnson 2Q profit jumps

Johnson & Johnson reported 2Q earnings of $17.8 billion, the company announced Tuesday (AP Photo/Lynne Sladky)
  • Johnson and Johnson earned %2417.9B or %241.33 per share in 2Q.
  • Profits rose 8.5%25 from 2Q 2012 due to a jump in sales of medicine and medical devices.
  • Johnson and Johnson is one of the Dow%27s flagship companies.
  • Health care giant Johnson & Johnson’s second-quarter profit more than doubled, thanks to higher sales of medicines and medical devices as it recovers from recalls and manufacturing problems that have cut into sales for four years.

    The comparison was made easier by last year’s quarter being hurt by $2.2 billion in charges for an acquisition, litigation and asset writedowns.

    The maker of baby shampoo, prescription drugs and medical devices handily beat Wall Street expectations and raised its profit forecast by a couple cents.

    CEO Alex Gorsky and Sandra Peterson, the new head of the consumer health business, both said J&J is making steady progress on short- and long-term goals, especially improving manufacturing and quality control in that business and other divisions.

    But they and other executives, speaking to analysts on a conference call, repeatedly referred to pricing pressures and other changes in the “dynamic global macroeconomic environment” affecting revenue growth. That included unfavorable currency exchange rates reducing revenue by 1.5%.

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    Gorsky also said that government and insurance payers have become less generous in rewarding “incremental improvements” in products with higher prices, but stressed that J&J has plenty of opportunity to expand sales, particularly in emerging markets.

    New Brunswick, N.J.-Based J&J said net income was $3.83 billion, or $1.33 per share, up from $1.41 billion, or 50 cents per share, a year earlier.

    Excluding one-time items, net income was $4.29 billion, or $1.48 per share.

    Revenue was $17.88 billion, up 8.5% from $16.48 billion a year earlier.

    Analysts polled by FactSet, on average, were expecting earnings per share of $1.39 and sales of $17.72 billion.

    “With our laser-focused approach, we’ve made solid, demonstrable progress in delivering on our financial commitments, restoring a reliable supply of over-the-counter products to consumers, continuing the successful integration of Synthes and building on the momentum of our pharmaceutical business,” Gorsky told the analysts.

    The company is still trying to resolve manufacturing problems that have led to about four dozen recalls since 2009, mostly of consumer health products such as Tylenol and Motrin.

    Reduced sales of the recalled products, plus the factory upgrades and increased regulatory inspections, have cost J&J well over $1 billion and kept many products out of stores. The company has repeatedly pushed back its forecast for when all the recalled nonprescription medicines will be back on store shelves, now aiming to have about 75% of those products back in stores by year’s end.

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    Meanwhile, the company’s revenue has been boosted by its $19.7 billion acquisition of surgical trauma equipment and orthopedic implants maker Synthes Inc. Last June.

    Sales of medical devices and diagnostics, J&J’s largest segment, climbed 9.6% to $7.19 billion in the quarter.

    Prescription drug sales jumped nearly 12% to $7.03 billion, led by strong sales of immune disorder drug Remicade and prostate cancer drug Zytiga.

    Sales of consumer health products edged up just 1.1%, to $3.66 billion.

    “Consumer sales are still languishing — the after-effects of their record string of recalls — but their pharmaceuticals sales are impressive, especially in their newer biologics,” drugs produced in living cells, wrote Erik Gordon, a professor and analyst at the University of Michigan’s Ross School of Business. “The news isn’t just about cost-cutting. It includes some impressive revenue gains that bode better for the long run.

    The company raised its profit forecast to $5.40 to $5.47 per share, excluding one-time items. In January, J&J said it expected earnings of $5.35 to $5.45 per share.

    Contributing: The Associated Press.

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