By Ransdell Pierson
NEW YORK (Reuters) - Johnson & Johnson, fueled by strong sales of consumer products and medical devices, reported third-quarter earnings that beat Wall Street expectations and lifted its shares more than 2 percent.
But sales of J&J
"The broad message today is that J&J's image as a safe place for investors is now even more tangible, with good predictability amid ongoing worries about the economic climate," said Les Funtleyder, an analyst with Miller Tabak & Co.
The diversified health-care company said on Tuesday it earned $3.31 billion, or $1.17 per share in the quarter. That compared with $2.55 billion, or 88 cents per share, in the year-earlier period, when the company took restructuring charges.
Analysts on average expected $1.11 per share, according to Reuters Estimates.
Quarterly sales rose 6.4 percent to $15.92 billion, somewhat higher than the Reuters Estimates forecast of $15.71 billion, but would have risen only 3.3 percent if not for favorable foreign exchange factors.
"J&J's results look stable, with consumer and devices doing OK and pharmaceuticals doing so-so," Funtleyder said. Cost controls and the relatively weak dollar -- which boosts overseas sales -- appear to have driven J&J's better-than expected earnings, he said.
Shares of rival Abbott Laboratories Inc
Jan Wald, an analyst with Stanford Group Co, said J&J posted solid results thanks largely to its diversified nature, although he does not expect its pharmaceuticals sales to greatly improve for another two to three years -- after new products are approved.
"In these times, it's worth staying with J&J; I think people would want to own it for its defensive nature," said Wald, who described the company's earnings picture as improving thanks largely to cost-cutting initiatives.
The company said it was having no problems getting access to short-term lending at attractive rates, and confirmed it has no exposure to subprime loans that have been a major cause of the ongoing global credit crisis.
"This is consistent with our general view that leading healthcare product companies have secure balance sheets and relatively little exposure to credit market issues," Sanford Bernstein analyst Geoffrey Porges said in a research note.
The company raised its 2008 earnings forecast, excluding special items, to $4.50 to $4.53 per share, from its earlier outlook of $4.45 to $4.50 per share.
But Chief Financial Officer Dominic Caruso cautioned that the strengthening dollar will crimp J&J's fourth-quarter global sales by 1.5 percentage points, in contrast to the company's earlier forecast that a weak dollar would boost sales by 3.5 percentage points.
A strong dollar hurts the value of overseas sales, when converted back into U.S. currency.
Third quarter sales of consumer products, which range from Band-Aids to Listerine mouthwash, rose 13.1 percent to $4.1 billion.
"The company is on the right side of things because its consumer brands are not luxury items," but affordable household staples used throughout the world, Wald said.
Medical device sales rose 8.8 percent to $5.71 billion, although sales of the company's Cypher drug-coated stent fell more than 20 percent to $289 million due to competition with newer products and continuing safety concerns about the tiny heart devices.
Prescription drug sales edged up 0.2 percent to $6.11 billion, hurt by the U.S. patent expiration for Risperdal that in June opened the floodgates to a cheaper generic made by Teva Pharmaceutical Industries Ltd
Shares of J&J were up $1.52, or 2.4 percent, at $64.20 in afternoon trading on the New York Stock Exchange. They had risen as high as $67.48 earlier in the session.
(Additional reporting by Lewis Krauskopf; Editing by Dave Zimmerman)
