Johnson & Johnson reported fourth quarter earnings on Tuesday beating estimates and making many analysts who were once quite skeptical somewhat excited. However, shortly after the net income and EPS numbers came out, (JNJ: 56.75, 0.00 (0.00%)) lowered guidance. This understandably came during tough economic conditions (yes, even for a Healthcare giant like JNJ). Johnson & Johnson did have quite an exciting year, especially in the fourth quarter as they were able to continue their trend of making strategic acquisitions, sweeping up companies engaged in the manufacturing and discovery of niche market products and drugs. That trend will continue through 2009 I believe with the deep valuations that are out in the market, but we’ll get into that a bit later. Let’s take a look at some of the numbers.
The Earnings
J&J earned $0.97 per share, or $2.71 billion, up from $2.37 billion, or $0.82 per share in the year ago quarter. Excluding charges and gains, J&J earned $0.94 per share, still above analysts polled by Thomson Reuters who estimated earnings of $0.92 per share. The one-time items accounted for in the fourth quarter included a $141 million research charge and $638 million gain in income for favorable settlements of lawsuits and other items. Revenue fell 4.9% to $15.18 billion from $15.96 billion, the first decrease they have seen since the end of 2004. That statistic may startle you because like many, people still believe Healthcare is recession proof, but as seen with the recent GDP Healthcare numbers, prescription drug spending has slowed to its lowest rate in 45 years. My last article on Healthcare and the Economy has more information on this very important issue. The quarterly revenue drop was led by an 11% decrease in pharmaceutical sales to $5.7 billion, mainly in part due to the 66.5% decrease in sales of Risperdal. Risperdal is JNJ’s schizophrenia drug which suffered from generic competition last June. Similarly other large drugs which have shown the same problems were Razadyne for dementia and Duragesic for pain.
The Consumer segment, acquired from Pfizer a few years back, had sales in the fourth quarter of $3.9 billion, slightly increasing by 1.2% from the same period last year. International sales were up 10.6% and U.S.
