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Improved Outlook Lifts J&J

First-quarter earnings are better than estimates.

Updated from 9:13 a.m. EDT

Johnson & Johnson

(JNJ) - Get Johnson & Johnson Report

raised its earnings forecast for the full year following a first quarter in which sales and profits easily beat Wall Street's expectations.

The New Jersey-based health care giant on Tuesday predicted higher earnings even as it copes with pressure on its stent business and questions about its anemia drug, all while it continues to absorb two recent acquisitions.

By midday, its shares rose $1.84, or 2.9%, to $64.86. The stock climbed as high as $65.40, and volume was heavier than normal.

J&J now expects to earn $4.02 to $4.07 a share this year, and Chief Financial Officer Dominic Caruso told analysts he is "comfortable" that the final tally will be in the middle of this range.

Although the prediction excludes some special items, it includes the impact of acquiring medical-device maker Conor Medsystems. The purchase, for $1.4 billion, closed Feb. 1. Previously, J&J had forecast earnings per share of $3.88 to $3.90, excluding items and the results of Conor. Analysts' consensus target had been $3.89 a share.

J&J's enthusiasm for the year was based on first-quarter earnings, before items, of $1.16 a share and revenue of $15.04 billion. Analysts polled by Thomson First Call were expecting earnings of $1.05 and sales of $14.44 billion.

"Our solid first-quarter results demonstrate the strength of our broadly based businesses, especially the strong performance of our pharmaceutical business," said William Weldon, chairman and CEO, in a prepared statement. "Our strategy of being broadly based continues to serve us well and is one of the keys to our consistent long-term performance."

Sales for the quarter surged more than 15% from $12.99 billion in the same period a year earlier. After all items were factored in, including an $807 million charge for Conor, J&J earned $2.6 billion, or 88 cents a share. Last year, the company had a profit of $3.3 billion and $1.10 a share.

Worldwide medical devices and diagnostics sales of $5.3 billion for the first quarter represented a 6.2% increase from the prior year. Global pharmaceutical sales of $6.2 billion rose 10.6% from the 2006 first quarter.

J&J's consumer segment had sales of $3.5 billion for the quarter, up 48.5%.

The division was aided by J&J's late 2006 acquisition of


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consumer-products business.

J&J's full-year forecast takes into consideration difficulties in the drug-coated stent business, as worldwide quarterly sales of the Cypher stent fell 27% from last year to $530 million. In the U.S., sales sank 35% to $240 million. Caruso said the device was affected by softer prices, competition and lower market penetration.

Drug-coated stents are mesh-like wire tubes inserted into arteries to enhance blood flow after plaque has been cleared from the vessels. The drug is released periodically from the stent to reduce the risk of reclogging. The Food and Drug Administration is keeping an eye on

suspected safety issues with the stents.

Another product being watched by the FDA is the

anemia drug Procrit, also sold as Eprex in foreign markets. The agency has ordered a tougher label to reflect a greater risk of death, blood clots, strokes and heart attacks if patients receive a higher-than-recommended dose.

The enhanced label also affects Aranesp and Epogen from


(AMGN) - Get Amgen Inc. Report


Given the concerns about these drugs, some analysts professed surprise that Procrit's worldwide sales rose 4% to $817 during the first quarter, while the U.S. component gained 1% to $530 million. J&J officials wouldn't comment on future sales trends except to say there would be some pressure due to the stricter label.

Caruso said the full-year earnings guidance reflects the new warnings. He said J&J will have a better idea about Procrit after an FDA advisory panel meets May 10 to discuss risks from the Amgen and J&J drugs.

Among other major drugs, J&J said worldwide sales of Topamax, for epilepsy and migraine headaches, rose 30% to $610 million. The anti-infective Levaquin gained 18% to $475 million, and Remicade, for several inflammatory diseases including rheumatoid arthritis, had a revenue increase of 7% to $731 million.

Schizoprenia drugs, including Risperdal and Risperdal Consta, saw sales improve 16% to $1.2 billion.