Johnson & Johnson beats 4Q profit views despite lower sales

Johnson & Johnson posted a 28% jump in fourth-quarter profit with the sale of its heart devices unit offsetting a weak performance from what was once its top moneymaker, as well as the strong dollar and a host of other charges at the world's biggest healthcare product company.

Net income was $3.2 billion, or $1.15 per share, up from $2.53 billion, or 89 cents per share, a year earlier. Adjusted net income was $4.04 billion, or $1.44 per share, which was 2 cents better than the per-share projections from Wall Street, according to survey by Zacks Investment Research.

J&J posted a $1.21 billion gain in other income, mainly for its October divestiture of its Cordis heart devices unit. Cordis had accounted for about a quarter of device sales.

Revenue for the maker of baby shampoo, prescription medicines and medical devices fell 2.4% to $17.81 billion, weighed down by a strong dollar that has weighed on other U.S. multinationals as well. It was short, however of analyst projections for 17.94 billion.

Johnson & Johnson, based in New Brunswick, N.J., expects full-year adjusted earnings, which excludes one-time items, of $6.43 to $6.58 per share, with revenue of $70.8 billion to $71.5 billion.

"As we enter 2016, our core business is very healthy, and the recent decisive actions we've taken in support of each of our businesses position us well to drive sustainable long-term growth, faster than the markets we compete in," said CEO Alex Gorsky in a printed statement.

Last week, Johnson & Johnson said it plans to restructure its underperforming medical devices business, which includes the reduction of about 3,000 jobs over the next two years.

Just a few years ago, medical device sales were surging and became J&J's top-grossing business. But those sales have been under strain of late, particularly for brands such as DePuy orthopedic implants and Ethicon surgical equipment.

Sales in the U.S., J&J's biggest market, jumped 8% to $9.29 billion. But sales to other countries dropped 11.7 percent, to $8.52 billion, hurt by the strong dollar. It reduced by 12.9% the value of foreign sales, which are paid for in weaker local currencies.

Sales of prescription drugs rose 0.8% to $8.06 billion, while sales of consumer health products fell 7.9% to $3.32 billion. Sales of medical devices and diagnostic equipment fell 3.3% to $6.43 billion.

"It was a decent quarter, with the bad news in devices offset by good news in drug sales and the announced cuts in the devices businesses," noted Erik Gordon, a professor and pharmaceuticals analyst at University of Michigan's Ross School of Business. "Guidance going forward is mildly encouraging, subject to uncertainty about the strength of the dollar. All eyes will be on the pharma business and whether the big sellers can show consistent sales increases."

For all of 2015, J&J reported net income fell 5.6% to $15.41 billion, or $5.48 per share. Revenue dropped 5.7% to $20.07 billion.

J&J shares rose by $1.34 to $97.74 when the market opened. Shares are down about 5% this year, which is a few points better than the Standard & Poor's 500 index.



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