Charges drag down J&J 4Q profit, but sales rebound 

Johnson & Johnson said Tuesday that fourth-quarter profit was barely a tenth what it made a year ago as a slew of charges for recalls, litigation and an acquisition dragged down income. But the health care giant's revenue jumped last year, ending an unprecedented two-year decline.

After two tough years overshadowed by an embarrassing series of product recalls and other problems, the maker of Tylenol, prescription drugs and medical devices managed to beat Wall Street's forecast for adjusted profit and came in just below its revenue forecast.

The company said net income was $218 million, or 8 cents per share, down from $1.94 billion, or 70 cents a share, a year earlier.

Excluding charges, net income was $3.13 billion, or $1.13 per share.

Revenue totaled $16.26 billion, up from $15.64 billion in 2010's fourth quarter.

Analysts polled by FactSet, on average, expected earnings per share of $1.09 and revenue of $16.28 billion.

"In the last five years, we've never felt better about our business coming out of one year and going into the next," CEO Bill Weldon told analysts during a conference call.

Revenue fell 3.4 percent in the U.S., to $6.99 billion, but jumped 10.2 percent in foreign countries, to $9.27 billion. The U.S. decline was mostly due to an 8 percent drop in sales of prescription drugs, as two big sellers — the powerful antibiotic Levaquin and Concerta for attention deficit hyperactivity disorder — got generic competition in the middle of last year.

Analysts were not impressed with the results.

Erik Gordon, an analyst and professor at the University of Michigan's Ross School of Business, called them "mediocre," adding that they were "saved, as has become typical for big pharma, by non-U.S. sales."

He said the "slow pace of consumer product sales trying to recover from" more than two dozen recalls of products due to quality problems is disappointing.

Since September 2009, J&J has recalled a host of prescription and nonprescription medicines, as well as replacement hip joints, contact lenses and diabetes test strips. Among the recalls were tens of millions of bottles of children's and adult Tylenol and Motrin, Benadryl, Zyrtec, Rolaids and Simply Sleep pills. The prescription drug recalls have included HIV medicine Prezista and epilepsy pill Topamax.

Reasons for the recalls have ranged from contamination with metal shards and glass particles, to nauseating odors and inaccurate levels of active drug ingredients.

Weldon said in an interview that J&J has eliminated some low-volume products made by J&J's McNeil Consumer Healthcare unit and should have most of the others back by the middle of the year, with the rest returning by year's end.

Analyst Steve Brozak of WBB Securities called the results lackluster. Like Gordon, he's concerned about profit margins declining due to multiple factors, including the costs of factory upgrades and litigation related to product recalls, the global economic slump and increasing pricing pressures from government health programs.

J&J said it expects 2012 earnings of $5.05 to $5.15 per share, excluding special items. Analysts had expected $5.20 per share.

In late-morning trading, shares of the company rose 23 cents to $65.23.

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