ABT) and Pfizer> ( PFE). Not to mention that the stock had already gained 30% on the year, so there was also the issue of value. I never believed in the idea of paying a premium for a stock when its peers are performing just as well, or even better, in some cases. My second concern was with the company's lack of diversification. I'm not suggesting that Johnson & Johnson is a one-trick pony. But while the company does have several highly regarded operations like orthopedics, medical devices, nutrition and (of course) drugs, it is the last that has provided all of the torque, while the other businesses have just skated by. And in this recent quarter, it was more of the same as the consumer business posted just 2% growth (in constant currency). While the device business registered a solid 12% growth, there was also a lot of moving parts in that number. When taking a deeper look from an organic perspective, the device business posted an anemic growth of less than 2%, when adjusting out the contribution from Synthes, which Johnson & Johnson acquired last year. This is not a situation where I'm trying to discredit the company for having made a timely acquisition. Management deserves plenty of credit for recognizing that Synthes was the right deal at the right time. But for me to take a chance here on this stock, which already carries high expectations, organic growth details become increasingly important.
Still, it was the company's flagship drug, Zytiga, which grew a stunning 70%, that injected plenty of life into an already outstanding performance in the drugs business. With such strong drug results, it was not surprising to see the 10% increase in operating income, which beat consensus estimates by almost 3%, but It was surprising to see the better-than-expected uptick in gross margin, which expanded by a half of one percent. All told, it was a solid quarter for Johnson & Johnson -- I can't deny this fact. But it's also undeniable that not all of the businesses are doing equal work. Follow @saintssense