J&J beats earnings, sales forecasts

Weak dollar is a strong reason for drug and health products maker's surge in quarterly income.

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By Aaron Smith, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- Johnson & Johnson on Tuesday reported jumps in earnings and sales for the first quarter, beating analyst expectations with some help from the weak U.S. dollar.

The health products and drug maker reported an 8% increase in sales to $16.2 billion and an 9% jump in earnings to $1.26 per share, not including the $800 million charge from the acquisition of Conor Medsystems.

Wall Street had expected a 4% increase in earnings for the first quarter to $1.20 per share and a 5% jump in sales to $15.8 billion, according to Thomson Financial's analyst consensus.

In the first quarter of 2007, the New Jersey-based company reported earnings per share of $1.16 and sales of $15 billion.

The company boosted its earnings guidance slightly, to a range of $4.40 to $4.45 per share, for the full-year 2008.

As seen with many other U.S.-based companies with a strong international presence, the weak dollar was a major driver for Johnson & Johnson (JNJ, Fortune 500). The company's overseas sales surged 14%, compared to a 3% increase for domestic sales. The company attributed 11% of its overseas sales gain to weak U.S. currency.

In a Web cast with analysts, chief financial officer Dominic Caruso attributed much of the company's sales boost to the recent launch of allergy drug Zyrtec as an over-the-counter product. The company did not break out Zyrtec sales specifically, but said that OTC sales surged 27% for the quarter to $1.6 billion. This helped to boost the company's overall consumer sales 16% overall, to $4 billion.

The company's consumer products blew away the lackluster sales for its name-brand drugs. Drug sales grew 3.3% in the first quarter to $6.4 billion. Without a currency boost from the weak dollar, the drug sales would have declined slightly.

Weak sales in drugs, stents

Drug sales were dragged down by Procrit, a drug taken by cancer patients to ward off the anemia caused by chemotherapy. Procrit sales plunged 23% to about $600 million in the quarter.

This drug, a member of the same class as Amgen's (AMGN, Fortune 500) Aranesp and Epogen, has been scrutinized by the Food and Drug Administration for potentially fatal side effects, though FDA advisers recently voted to keep it on the market.

Caruso blamed increased competition for the decline in stent sales. Sales from the company's Cordis division, which makes the drug-coated Cypher stent, dropped 10% to about $800 million for the quarter. In this area, J&J competes with Boston Scientific's (BSX, Fortune 500) Taxus stent and the recently approved Endeavor stent from Medtronic. (MDT, Fortune 500)

Stents are used to prop open arteries after angioplasty procedures. Drug-coated stents have come under FDA scrutiny over reports that they cause blood clots, but this has not been proven.

J&J's overall sales for medical devices and diagnostics rose 7% to $5.7 billion, mostly because of the weak dollar.

J&J's stock price didn't show much reaction to the earnings report, dipping 32 cents to $65.42 in afternoon trading. Les Funtleyder, analyst for the institutional trading firm Miller Tabak, said investors consider the large, diverse company to be a "safe haven stock" in troubled times.

But he rates the company "neutral" because he doesn't see it as a growth stock.

"In a choppy market, it's probably one of those places where investors will hide out," said Funtleyder. "But as we move into the new decade, they'll have to bring some new products out if they want to maintain the growth multiple."

Johnson & Johnson is the world's largest drug company in terms of sales, but that figure includes medical devices and consumer products. Pfizer (PFE, Fortune 500) is the world's largest company that primarily sells drugs. To top of page

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