Tuesday, September 10, 2013

Johnson & Johnson Q2 Profit Up 172% Thanks To A Brutal 2012


Health care giant Johnson & Johnson JNJ +0.46%‘s profit more than doubled in the second quarter, partly driven higher from a recent sale and strong medical-device sales, but also made possible by an easy comparison to a figures from a year ago. In addition, the company increased its full-year profit forecast, offering investors another optimistic signal that it’s successfully moving past a period marred by product recalls and manufacturing problems.

Looking ahead, J&J expects to earn between $5.40 to $5.47 a share in 2013, above an earlier range of $5.35 to $5.45 a share. Analysts had expected J&J to make $5.41 a share.
In the most recent quarter, J&J’s net income was $3.83 billion, $1.33 a share. That’s up dramatically from $1.41 billion, 50 cents a share, from a year earlier. Excluding one-time items, J&J earned $4.29 billion, $1.48 a share. Analysts expected J&J to earn $1.39 a share. The second quarter included the April sale of J&J’s stake in Elan ELN -0.45% Corp., the Irish biotech company that J&J teamed up with to create an Alzheimer’s drug. It was the second consecutive quarter in which a special item added a one-time gain, after a reversal of a Medicaid payment provided a boost in the first quarter.
Sales rose 8.5% to $17.88 billion, ahead of the $17.72 billion estimate from analysts.

Shares of J&J rose 1% to $91.27 in early morning trading. J&J is a $256 billion behemoth that dwarfs even top U.S. competitors like Merck Merck, Eli Lilly, Stryker SYK +0.33% Corp. and Medtronic. It’s the world’s largest health care-products manufacturer, ahead of Swiss Roche Holdings and French Sanofi SA.

A year ago, it was a different story entirely for the New Brunswick, N.J. company. J&J wrote off $2.2 billion for troubled acquisition, litigation and assets costs in the second quarter of 2012. What’s more, recalls have continually plagued J&J, with the company issuing four dozen or so recalls since 2009. Pulling consumer staples like Tylenol and Motrin off shelves damaged J&J’s reputation, and the company last year turned to a new CEO, Alex Gorsky, to lead the company.

The after-effects remain apparent in J&J’s second-quarter numbers: sales in its consumer-health business, which include drugs like Tylenol, rose just 1.1% to $3.66 billion. J&J today is still trying to return all the recalled products to stores.

To withstand the loss in its consumer-health business,  J&J is pinning its hopes on medical devices, its largest division. It paid $19.7 billion for Synthes last June, a company that makes surgical trauma equipment. J&J’s sales of medical devices and diagnostics increased 9.6% to $7.19 billion in the second quarter.

Prescription drugs sales also experienced a large jump. That revenue rose 12% to $7.03 billion with strong demand for prostate cancer drug Zytiga and immune disorder drug Remicade.
Reach Abram Brown at abrown@forbes.com.


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