Johnson & Johnson (
JNJ) reported fourth quarter 2008 financial results this morning. Revenue for the fourth quarter came in at $15.2 billion, about $1.0 billion below our forecast and down 5% from the same period in 2007.
Much of the short-fall in revenues can be explained by foreign exchange, having a 4% negative impact on quarter for J&J. Operational growth declined by 1.0%. The Consumer, Pharmaceutical, and Medical Devices segments posted growth of 10.5%, (1.2%), and 6.4%, respectively in the quarter.
The Consumer segment continues to benefit from the recent launch of OTC Zyrtec in the U.S. and the skin care business lead by Neutrogena and Aveeno. Pharmaceutical division sales were impacted by lower sales of Risperdal, now widely available as a generic alternative, Procrit, which continues to be hurt by the overall ESA market decline, and Remicade, which continues to lose market share to
Amgen's (
AMGN) Enbrel and
Abbott's (
ABT) Humira.
Medical Device sales benefitted from strong growth in the Ethicon Endo-Surgery and DePuy business segments which was partially offset by continued weakness in the Cordis, the division that sells Cypher, J&J's drug-eluting stent, which continues to lose market share to Abbott's Xience.
Despite the revenue short-fall, earnings per share (EPS) on an adjusted basis was $0.94 compared to our forecast of $0.93 and the Street consensus at $0.92. Earnings exceeded expectations due to significantly better-than-expected gross margins, higher interest and other income, and a lower-than-expected tax rate.
Management issued initial EPS guidance for 2009 that was below expectations. J&J expects adjusted-EPS in the range of $4.45 - $4.55 including a $0.03 - $0.05 expected dilution related to the Mentor acquisition. This was below our forecast for 2009 of $4.65 including Mentor.
Adjusted earnings per share for 2008 came in at $4.55 per share, so the guidance for potentially down year-over-year EPS is disappointing. However, we think J&J is being conservative given the challenging economic environment and the potential for continued wild swings in the U.S. dollar exchange rate.
We expect additional clarity on the 2009 to be discussed on the earnings conference call.
