Johnson & Johnson’s (JNJ: 58.12 -1.45 -2.43%) second-quarter 2010 earnings (excluding special items) of $1.21 per share was in-line with the Zacks Consensus Estimate but 5.2% above the year-ago earnings. Including an after-tax gain of $67 million arising from litigation, earnings for the reported quarter came in at $1.23.The company’s revenues for the reported quarter increased 0.6% year-over-year to $15.3 billion. Operational factors and foreign exchange movement had a positive impact of 0.1% and 0.5%, respectively, on sales in the quarter. Although sales in the domestic market came down by 2.8%, sales in international markets increased 4.1%.
Segments
The Medical Devices & Diagnostics segment posted higher revenues than the pharmaceuticals segment in the reported quarter. The Medical Devices & Diagnostics segment generated revenues of $6,130 million, an increase of 4.1% from the year-ago period. Both operational factors and foreign exchange movement contributed to this growth by 3.5% and 0.6%, respectively. Sales in the domestic and international market increased 3.2% to $2,865 million and 5.0% to $3,265 million, respectively.
Primary contributors to growth include Ethicon’s surgical care products, Ethicon Endo-Surgery’s minimally invasive and advanced sterilization products; DePuy’s orthopaedic joint reconstruction business; and Biosense Webster’s electrophysiology operations, partially offset by lower sales in the Cordis franchise. The Medical Devices & Diagnostics segment should continue to be a significant contributor to J&J’s top-line and is expected to grow substantially faster than pharmaceuticals.
The Consumer segment recorded revenues of $3,647 million in the reported quarter, down 5.4% from the second quarter of 2009. Operational factors reduced sales by 6.5%, while foreign exchange positively impacted sales in the segment by 1.1%. Sales in the domestic market came down by 14.3% year-over-year to $1,463 million, whereas the international market recorded a 1.8% year-over-year growth to $2,184 million.
Sales of baby care products in international markets, Neutrogena and dermatological offerings for adults contributed to the operational growth in the segment. The series of over-the-counter (OTC) product recalls conducted by Johnson & Johnson’s McNeil Consumer Healthcare division over the past few months hampered revenues in the segment.
Johnson & Johnson continues to struggle with its Pharmaceutical segment, which recorded a marginal 1.0% year-over-year increase in revenues to $5,553 million. Sales in the domestic market came down by 2% to $3,110 million whereas the international market recorded a 5% growth to $2,443 million.
While drugs such as Topamax and Risperdal were negatively impacted by generic competition, products such as Prezista, Intelence and Velcade recorded strong growth. Newly launched products such as Stelara and Simponi also recorded strong growth.
In addition to posting second quarter results of fiscal 2010, Johnson & Johnson lowered its guidance for 2010. The company expects EPS in the range of $4.65 - $4.75 compared to the earlier guidance (provided with the first quarter results) of $4.80 - $4.90. This reflects the impact of the OTC product recall and foreign exchange headwind. The Zacks Consensus Estimate is $4.80 for 2010.
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