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) --

Johnson & Johnson's

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earnings beat came as its pharmaceutical division continued to reinvigorate its growth profile.

"J&J's stock had been dead in the water because its fundamentals were suffering," Jeff Bagley, portfolio manager at Haverford Investments told


, but over the last four months success in its pharmaceutical division has "clearly been where the upside is."

In its recent quarter, J&J's pharma division saw sales increase by 12.3% to $6.23 billion. J&J pharmaceutical unit competes with other major drugmakers such as


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(MRK) - Get Merck & Co., Inc. (MRK) Report



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>>J&J's Pipeline Starting to Bear Fruit

J&J received approval for three new drugs in recent months. J&J received marketing approval in the U.S. for a prostate cancer pill called Zytiga in April. The company was then granted approval for Edurant, a once-a-day HIV pill, in May, and for Xarelto, a drug used to prevent blood clots after knee and hip replacement surgeries, on July 1.

Generic drugs have dragged on J&J's pharmaceuticals business in recent years, and the company, which also makes Band-Aids, replacement joints and birth control pills, among other things, hopes to gain approval for around 10 new drugs by 2015, including medicines used to treat Alzheimer's disease, diabetes and arthritis.

>> 2011 Consumer Recall Alerts

J&J's latest earnings

also benefited from a lower-than-expected tax rate, Haverford's Bagley pointed out, which he estimated added around 4 cents per share to quarterly earnings.

Despite the beat, J&J reaffirmed its 2011 guidance, saying instead it would reinvest any tax savings into its new product launches and R&D pipeline.

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"J&J is striking while the pharma iron is hot," Bagley said. "That's where they're enjoying a lot of success."

J&J also saw sales gains in its other two divisions, medical devices and consumer products, the latter of which suffered a series of embarrassing

product recalls for popular medicines like Tylenol, Motrin and Rolaids

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J&J medical devices unit, where it competed with

Abbott Laboratories

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in the stent market before closing down those operations, and still competes with orthopedic replacement makers


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, saw a sales increase of 7.2% to $6.57 billion.

Because of its wide range of diversification within the health care, biotechnology and drug sectors, J&J is widely considered an industry bellwether.

J&J's stock was lower by 0.5% at $66. 73 in afternoon trading Tuesday despite the earnings beat, likely because of it stood pat on its earnings outlook.

In the recent quarter, J&J booked a profit of $2.78 billion, or $1 per share, compared with year-earlier earnings of $3.45 billion, or $1.23 per share. Excluding one-time costs, J&J's profit came in at $3.55 billion, or $1.28 per share. On that basis, results topped analysts' consensus call for a profit of $3.44 billion, or $1.24 a share in the June-ended period. Analysts typically exclude one-time items when forecasting estimates.

Revenue rose 8.3% to $16.6 billion, from $15.33 billion. The line item also came in higher than the $16.23 billion Wall Street expected.


Written by Miriam Marcus Reimer in New York.

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