Updated from 9:11 a.m. EST Johnson & Johnson ( JNJ) Tuesday reported fourth-quarter results that beat analysts' expectations as the company reported record sales for the fourth quarter. Excluding one-time items, J&J earned $2 billion, or 67 cents a share, on revenue of $12.8 billion. Analysts polled by Thomson First Call were expecting a profit of $1.92 billion, or 64 cents a share, on revenue of $12 billion. For the same period in 2003, the company earned $1.85 billion, or 62 cents a share, on revenue of $11.25 billion. The news sent J&J's stock up, recently higher by $2.29, or 3.7%, to $63.78, less than $1 below the 52-week high. On a reported basis, J&J earned $1.2 billion, or 41 cents a share, for the three months ended Dec. 31, thanks primarily to a $789-million tax charge related to a new law that allows companies to repatriate earnings from their foreign subsidiaries at a reduced tax rate. The law, signed by President Bush in October, says repatriated profits can be taxed at a 5.25% rate instead of the usual 35% corporate tax rate. Last week, J&J said it would repatriate about $11 billion in foreign subsidiary earnings, but it did not identify a specific use for the funds. Robert J. Darretta, the chief financial officer, said he expected earnings per share to grow about 10% this year, making him comfortable with an EPS estimate of $3.38 to $3.41. The consensus among analysts polled by Thomson First Call is $3.35. Darretta said he expects total sales to grow in the range of 5% to 7% for the year, lower than "traditional double-digit levels." He attributed the lower rate to the anticipated generic competition for Duragesic, a transdermal patch pain reliever, and Concerta, a treatment for attention deficit hyperactivity disorder. Duragesic contributed nearly $2.1 billion in sales in 2004; Concerta added $695 million. Darretta said he expects sales growth to return to historical levels in 2006. Darretta said his financial projections exclude the impact of the pending acquisition of Guidant ( GDT) as well as new accounting rules for the expensing of stock options which take effect July 1. The full-year impact of the change in stock options accounting should be 12 cents a share, he said. The Guidant deal remains on track to close in the middle of the year, Darretta said. The transaction must be approved by U.S. and foreign regulators, as well as by Guidant shareholders who are expected to vote during the second quarter. The cash-and-stock deal is valued at $23.9 billion.
The Year In Review
For fiscal 2004, J&J earned $8.51 billion, or $2.84 a share, on revenue of $47.3 billion. For fiscal 2003, the company reported a profit of $7.2 billion, or $2.40 a share, on revenue of $41.9 billion. Both sets of figures include one-time charges and gains.