Johnson & Johnson 4th-qtr sales climb 9 pct, but profit falls on $1.1B restructuring charge

J&J sales climb, but profit falls on big charge

TRENTON, N.J. — The pain of the recession is easing just a bit for Tylenol and Band-Aids maker Johnson & Johnson, which on Tuesday reported a healthy jump in fourth-quarter sales. But J&J still posted its first yearly decline in sales since the Depression, gave a disappointing 2010 profit forecast and saw its stock price fall as a result.

Profit for the October-December quarter also was down, due to sharply lower U.S. sales of some high-margin prescription drugs and a $1.1 billion charge before taxes for its biggest restructuring ever. That program will eliminate up to 8,000 jobs, or nearly 7 percent of the New Brunswick, N.J., company’s work force.

The world’s largest maker of health care products said sales rose 9 percent to $16.55 billion, mainly due to new products and a boost of 4.5 percent from currency exchange rates. But profit dropped 19 percent to $2.21 billion, or 79 cents per share — $1.02 excluding one-time items.

Analysts were expecting revenue of $15.7 billion and earnings per share of 97 cents, excluding items.

J&J beat that, but its profit forecast for 2010 — $4.85 to $4.95 per share, excluding one-time items and the impact of any eventual health care overhaul — was a bit lighter than analysts’ range of $4.85 to $5.06, or $4.94 on average. J&J shares fell almost $1 initially, and were down 36 cents at $62.86 in afternoon trading.

Analyst Les Funtleyder of Miller Tabak & Co. said he thought J&J’s profit forecast was conservative and so drove down the stock.

“I think people wanted more evidence that the turnaround was happening faster,” he said.

“We’re willing to give them a couple more quarters,” Funtleyder said. “We think things are getting better, but they’re getting better slowly. Nothing happens overnight with a big company like this.”

Swiss drugmaker Novartis AG reported a far rosier picture, with a 54 percent rise in fourth-quarter profit to $2.32 billion that boosted its share price by 2 percent on the Zurich exchange.

The company, which also appointed an American, Joe Jimenez, as its new CEO, credited favorable exchange rates and strong sales. Overall, sales were up 28 percent at $12.93 billion, partly from shipping $1 billion worth of swine flu vaccine in the final three months of 2009.

The maker of blood pressure drug Diovan and anticancer drug Gleevec offered a positive outlook for 2010, predicting mid-to-high single digit growth in its pharmaceuticals division and mid-single-digit growth overall.

J&J’s sales had fallen over the prior four quarters as the recession pushed penny-pitching consumers to buy cheaper store brands. Even in the fourth quarter, sales were still down for items including Reach toothbrushes, OB tampons and Acuvue contact lenses. Meanwhile, sales of epilepsy drug Topamax and the older, pill form of schizophrenia drug Risperdal have been slashed by generic competition.

“The takeaway from this was, ‘Things are bad, but we’re not as bad off as everyone else,’” said analyst Steve Brozak of WBB Securities.

He noted that J&J has $14.2 billion in free cash flow, yet has only made eight major acquisitions the past two years.

“That is simply not enough,” he said.

Chief Executive Bill Weldon told analysts the company’s results were “impressive” given “a soft economy and the rise of private-label brands” worldwide, plus the loss of $3 billion in sales due to generic competition.

He called 2009 “one of the most difficult years in our company’s history,” with its first yearly sales decline in 76 years, the job cuts and a major recall of Tylenol and other products that has led it to review its internal processes.

“I think we’re on a really strong trajectory,” with promising new products on the horizon and health spending climbing about 5 percent a year globally, Weldon added.

In the fourth quarter, sales of consumer products rebounded strongly, climbing 10 percent to $4.25 billion. Most of that improvement came overseas. Sales of prescription drugs were up just over 5 percent at $5.99 billion, with growth in other countries offsetting a small decline here. The medical devices and diagnostics division, now J&J’s largest, saw the biggest improvement, a 12 percent jump in sales to $6.31 billion.

For the full year, the company reported net income of $12.27 billion, or $4.40 per share, down 5 percent from $12.95 billion, or $4.57 per share. Sales slipped 3 percent to $61.9 billion from $63.75 billion.