J&J Forecasts 2012 Profit That Misses Analyst Estimates
February 06, 2012, 6:40 PM ESTBy Alex Nussbaum
(Updates shares trading in the fifth paragraph.)
Jan. 24 (Bloomberg) -- Johnson & Johnson, the world’s second-biggest health-care company, forecast 2012 earnings that missed analyst estimates and said fourth-quarter profit plunged 89 percent on legal settlements and an artificial hip recall.
Net income fell to $218 million, or 8 cents a share, from $1.94 billion, or 70 cents, a year earlier, New Brunswick, New Jersey-based J&J said in a statement today. Earnings excluding one-time items of $1.13 a share beat the $1.09 average estimate of 20 analysts in a Bloomberg survey.
Chief Executive Officer William C. Weldon said on a conference call that the company had “turned the corner” on recalls and quality issues, erasing a decline in today’s share price. Weldon has seen sales growth hurt by recalls of consumer medicines including Tylenol and hip implants over two years.
“There’s nothing here that’s frightening, though we’d love to see a little bit more oomph in the revenue line,” said Les Funtleyder, a Miller Tabak & Co. portfolio manager in New York, in a telephone interview.
J&J rose than 1 percent to $65.07 at 10:22 a.m. in New York trading. The shares had gained 3.7 percent in the 12 months before today. Pfizer Inc., based in New York, is the top seller of medical products.
The company forecast 2012 profit of $5.05 to $5.15 a share, less than the $5.20 analyst estimate. Currency effects will drag down the results by about 13 cents, Johnson & Johnson said.
$2.9 Billion
Fourth-quarter sales rose 3.9 percent to $16.3 billion, as pharmaceutical revenue jumped 6.7 percent to $6.09 billion. J&J won approvals last year for drugs including Zytiga for prostate- cancer, Edurant for HIV, Xarelto to prevent strokes and hepatitis C treatment Incivo.
Sales of consumer products increased 1.6 percent to $3.67 billion. Revenue from J&J’s biggest unit, the medical-devices division, climbed 2.7 percent to $6.49 billion.
The results included $2.9 billion in costs for litigation settlements, the DePuy hip recall program, an adjustment to a currency option and acquisition expenses for Synthes Inc., the company said in the statement.
Turned Corner
J&J has successfully steered through a period that included product recalls, a withdrawal from the heart stent market amid declining sales, a worldwide economic slump and drug-patent expirations, Weldon said on a conference call with analysts.
“We have turned the corner with a particularly difficult period for our company,” Weldon said. The recalls and quality issues “are being or have been addressed.”
The company’s Fort Washington, Pennsylvania, plant that had been closed because of the recalls is expected to reopen next year, Weldon said.
In contrast to most of 2011, exchange rates were a drag on sales in the fourth quarter, said Glenn Novarro, an RBC Capital Markets analyst in New York, in an interview. The dollar’s value rose against foreign currencies during the quarter, lowering the worth of revenue earned outside the U.S.
The company lost business the last two years as it recalled millions of defective over-the-counter medicines, hip implants and prescription drugs. Last April, J&J announced its biggest deal ever, the $20.3 billion purchase of orthopedics company Synthes, in part to overcome slowing device sales.
Fourth-quarter profit in 2010 also was held down by $922 billion in charges for litigation settlements and the hip implant recall.
--Editors: Bruce Rule, Reg Gale
To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net.
To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net
