Monday, January 25, 2010

Johnson & Johnson (NYSE: JNJ): Q4 Earnings Preview 2009

Johnson & Johnson (NYSE: JNJ), the world's largest health-products company, is scheduled to release its fourth quarter 2009 earnings before the opening bell on Tuesday, January 26, 2010. Analysts, on average, expect the company to report earnings of 97 cents per share on revenue of $15.70 billion. In the year ago period, the company reported earnings of 94 cents per share on revenue of $15.18 billion.

Johnson & Johnson engages in the research and development, manufacture, and sale of various products in the health care field worldwide. Its Consumer segment provides products used in baby care, skin care, oral care, wound care, and women's health care fields, as well as nutritional and over-the-counter pharmaceutical products under No More Tears baby shampoo, Band-Aids, Clean&Clear skin care line, Visine, Tylenol, Listerine and more. J&J operates through three segments: consumer, pharmaceuticals, and medical devices and diagnostics, with subsidiaries in 57 countries.

The New Brunswick, New Jersey-based company's third-quarter net income was $3.35 billion, up 1.1% from $3.31 billion earned a year earlier. Moreover, per share earnings improved 2.6% to $1.20 from $1.17 in the same quarter of last year.Quarterly sales to customers totaled $15.1 billion, a decline of 5.3%, compared to $15.9 billion in the previous year,as weak sales of its prescription drugs Topamax and Risperdal were negatively impacted by generic competition. Analysts, on average, expected the company to post earnings of $1.13 per share on revenue of $15.22 billion.

In November, the diversified healthcare giant announced global restructuring initiatives, including elimination of 6% - 7% of its global workforce, to solidify its position as the world's leading global health care company. The company said that the restructuring initiatives aims at a $1.4 billion to $1.7 billion cost savings when fully implemented in 2011, with $800 million to $900 million expected to be achieved in 2010. Additionally, Johnson & Johnson expects to record an associated pre-tax, restructuring charge in the range of $1.1 billion - $1.3 billion in the fourth quarter of 2009, treated as a special item.

In November, the company also reaffirmed its fiscal 2009 earnings guidance of $4.54 to $4.59 per share, excluding the impact of special items such as restructuring charges.

For J&J, fourth quarter was a busy one on the front of acquisitions. The company made two acquisitions in the quarter: Acclarent, which makes devices for minimally invasive treatment of ear, nose and throat disorders, for $785 million; and Gloster Europe, a privately held developer of health care-acquired infections meds.

During the quarter, the FDA approved Stelara for psoriasis, and European authorities approved Simponi for arthritis. Several devices were also cleared by regulatory authorities.

However, the Food and Drug Administration for a second time rejected J&J's experimental antibiotic ceftobiprole, for complicated skin infections like MRSA, in December, saying it will require additional studies.

In November and again in December, J&J recalled lots of its widely-used pain reliever Tylenol over similar complaints. At the time of the December recall, the Food and Drug Administration said that it believed the breakdown of a certain chemical applied to the wooden pallets used to ship the product was the culprit. In January the company expanded the recall of lots of its pain reliever Tylenol to include such other popular over-the-counter brands as Benadryl, Motrin, and Rolaids.

Recently, the Department of Justice filed a complaint against J&J alleging that the company paid millions of dollars in kickbacks to Omnicare. The complaint asserts that the company paid the pharmacy group, which supplies drugs to nursing homes, to purchase and recommend J&J drugs.

Meanwhile, J&J is also engaged in a legal battle with rival Merck & Co. over rights to foreign sales of blockbuster biotech drug Remicade, for rheumatoid arthritis and other immune disorders, and successor drug Simponi.The dispute began when Merck acquired Schering-Plough Corp., with whom J&J jointly sold the drugs. Last week, a federal judge in Delaware declared invalid a quartet of Johnson & Johnson's Cordis Corp. subsidiary's patents for its drug-coated stents Cypher. The patents in question are at the heart of complicated legal wrangling involving Boston Scientific Corp., Johnson & Johnson, Abbott and Wyeth.

Analysts and industry experts believe that the healthcare giant will report higher earnings in the fourth quarter, thanks to the newer mix of products and economic rebound. However, few analysts are expecting another drop in quarterly sales.

The company's stock currently trades at a forward P/E (fye 28-Dec-10) of 12.80 and PEG (5 yr expected) of 1.83. In terms of stock performance, J&J shares have gained nearly 12% over the past year.

Full Disclosure: None.
Related Posts with Thumbnails

Wikinvest Wire