Johnson & Johnson
) posted second quarter 2012 earnings (excluding special items) of
$1.30 per share, a penny above the Zacks Consensus Estimate and
1.6% above the year-ago earnings of $1.28 per share. Results were
impacted by negative currency fluctuation.
Revenues declined 0.7% year-over-year to $16.5 billion, just shy
of the Zacks Consensus Estimate of $16.7 billion. While operational
factors favorably impacted sales by 3.5%, currency fluctuations had
a negative impact of 4.2%. Results included the impact of the
recently completed Synthes acquisition, which contributed 1.2% to
global operational sales growth.
Including one-time items, Johnson & Johnson reported second
quarter earnings of 50 cents per share, 50.0% below the year-ago
earnings of $1.00.
The Quarter in Detail
Second quarter sales declined 1.2% in the domestic market.
Meanwhile, international sales declined 0.4%, consisting of 7.1%
operational growth and 7.5% negative currency impact. While both
the Consumer and the Medical Devices & Diagnostics segments
posted a decline in sales, the Pharmaceutical segment recorded a
slight increase in sales.
The Medical Devices & Diagnostics segment posted sales of
$6.6 billion, down 0.1% year-over year. While operational factors
positively impacted Medical Devices & Diagnostics segment sales
by 3.4%, foreign exchange movement negatively impacted sales by
Sales in the domestic market increased 2.9% to $3.0 billion;
international market sales declined 2.4% to $3.6 billion. Results
included the impact of the recently concluded Synthes
Primary contributors to growth included orthopedic sales from
Synthes products, Biosense Webster's electrophysiology business,
Ethicon's wound care products, LifeScan's blood glucose monitoring
products, and international sales of energy products. The
Cardiovascular Care franchise continued to record a decline in
sales reflecting the company's exit from the drug-eluting stent
Challenges in several Medical Devices & Diagnostics markets
remain in the form of European austerity measures, pricing pressure
and a slowdown in elective surgeries, which have all contributed to
more tempered growth rates.
Pharmaceutical segment sales increased 0.9% year-over-year to
$6.3 billion (operational growth of 5.1% and negative currency
impact of 4.2%). Sales in the domestic market declined 4.5% to $3.1
billion whereas the international market grew 6.8% to $3.2
US sales were impacted by the genericization of Levaquin and
supply problem regarding Doxil/Caelyx due to third-party
manufacturing issues. Johnson & Johnson is working on resuming
supply of Doxil/Caelyx before late 2012 and is exploring several
Recently launched products like Zytiga, Incivo, Stelara, Simponi
and Invega Sustenna continued to perform well. Johnson &
Johnson also recorded incremental sales due to the amendment of its
distribution agreement with
) for Remicade.
The Consumer segment recorded revenues of $3.6 billion in the
reported quarter, down 4.6% from the second quarter of 2011.
Foreign currency movement negatively impacted sales in the segment
by 5.2%. Sales in the domestic market declined 1.9% year-over-year
to $1.3 billion, whereas the international market recorded a 6.0%
year-over-year decline to $2.3 billion.
Cuts 2012 Earnings Guidance
Following the release of second quarter results, Johnson &
Johnson cut its outlook for 2012. The company now expects earnings
per share of $5.00 - $5.07 in 2012 (old guidance: $5.07 - $5.17 per
The guidance mainly reflects the negative impact of currency
fluctuation, partially offset by the positive impact of the Synthes
acquisition. The updated guidance was well below the Zacks
Consensus Estimate of $5.14 per share.
Neutral on Johnson & Johnson
We currently have a Neutral recommendation on Johnson &
Johnson, which carries a Zacks #2 Rank (short-term Buy rating).
While we expect the Johnson & Johnson to continue facing
headwinds in the form of pricing pressure, manufacturing issues and
US healthcare reform, we believe Johnson & Johnson's
diversified business model, lack of cyclicality, and strong
financial position will continue helping Johnson & Johnson pave
its way through tough situations.
JOHNSON & JOHNS (JNJ): Free Stock Analysis
MERCK & CO INC (MRK): Free Stock Analysis
To read this article on Zacks.com click here.