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Dow 30 Earnings: Johnson & Johnson – Fourth Quarter 2010
Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report), the world's largest healthcare company, with products ranging from BAND-AID adhesive bandages to antibiotic drugs like LEVAQUIN, closed out a difficult 2010 with decent fourth-quarter results. Share profits slid to $0.70, as the company recorded $922 million in charges related to litigation settlements, product liability costs, and expenses associated with the DePuy ASR hip recall. Excluding these items, share earnings rose by a penny year to year, to $1.03, which was in line with our target. Revenues came in at $15.6 billion, which was down about 6% from the year-earlier figure and 3% below our estimate.
The Consumer segment's woes continued in the December period, accounting for the lion's share of the top-line decline. The unit has come under heightened scrutiny due to a series of recalls of certain over-the-counter medicines and the suspension of manufacturing at a Pennsylvania-based facility. J&J's Pharmaceutical and Medical Devices & Diagnostics divisions fared a bit better, but results remained under pressure. Governments and healthcare providers around the globe continued to look for ways to rein in spending. Too, many patients that were still feeling the effects of the recent recession opted to put off elective procedures.
Concurrently, the healthcare company issued 2011 earnings guidance. Management said it expects to generate a per-share figure of $4.80-$4.90, excluding the impact of more one-time items that are likely on the horizon. We were looking for share net to approximate $5.05 this year, but have pared our estimate to fall in line with the updated guidance range. On the bright side, despite the likelihood of near-term pressures, management remained optimistic about J&J's longer-term prospects.
JNJ shares sold off slightly following the announcement. We maintain our view that this blue chip remains an excellent buy-and-hold candidate and believe it would make a fine addition to just about any portfolio. The stock's valuation remains fairly inexpensive; company profits are likely to increase over the long haul; and the equity offers a healthy dividend yield.
About The Company: Johnson & Johnson manufactures and sells health care products. Its major lines consist of numerous household products. The company operates in a diverse number segments, including Consumer (baby care, nonprescription drugs, sanitary protection, and skin care), Medical Device & Diagnostics (wound closures, minimally invasive surgical instruments, diagnostics, orthopedics, and contact lenses), and Pharmaceutical (contraceptives, psychiatric, anti-infective, and dermatological drugs).
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.