J&J Is Another Victim of the Dollar

Johnson & Johnson ($JNJ) reported adjusted second-quarter earnings of $1.30 per share this morning which was one penny better than expectations. Sales for the quarter fell by 0.7% to $16.48 billion which was $0.21 billion below Wall Street’s forecast.

While J&J has introduced some promising new drugs recently, sales have been pressured by the loss of patent protection for older drugs, including attention deficit/hyperactivity disorder treatment Concerta.

The health-care giant also recently completed its $19.7 billion acquisition of orthopedic products maker Synthes Inc., which it plans to integrate with its DePuy business. In the latest quarter, Synthes contributed 1.2 percentage points to global sales growth.

The bad news is that Johnson & Johnson is getting squeezed by the strong dollar. The company lowered its full-year forecast today from $5.07 – $5.17 per share to $5.00 – $5.07 per share. In last week’s CWS Market Review I said I think the company has a shot of earnings $5.21 per share this year. I was clearly too optimistic.

The silver lining is that the lower guidance isn’t due to problems with operations but rather due to the foreign exchange rate. I’m not as worried by that since foreign exchange issues come and go. If it’s a problem with the business itself, that’s something much more worrying.

I still like Johnson & Johnson and the stock has performed well in the past month. Going by this morning’s price, the shares yield 3.6%.

Posted by on July 17th, 2012 at 9:22 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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