Income · Stocks to Consider and Updates

Johnson & Johnson Beats Earnings Estimates; Guides Higher for 2016

JNJ     Johnson & Johnson (NYSE: JNJ – $100.23) a manufacturer of medical devices, pharmaceutical and consumer packaged goods, announced fourth quarter sales of $17.8 billion, a decrease of 2.4% as compared to 2014, and below Street estimates of $17.86 billion.  Domestic sales increased 8.0%, but international sales decreased 11.7%, reflecting operational growth of 1.2% and a negative currency impact of 12.9%. The company reported adjusted net income of $4.04 billion, or $1.44 per share, up from $3.89 billion, or $1.37 billion, in the prior year quarter and exceeding analyst estimates of $1.42.  J&J said relatively new drugs such as Xarelto and Imbruvica were driving increased sales in its pharmaceuticals division, while nearly all of the company’s recalled consumer health products like children’s Tylenol were back on store shelves and helping turn around that business after years of manufacturing issues. Earlier this week the company said it would cut about 3,000 jobs in its medical devices division as part of an effort to remove $1 billion in annual costs in the business that makes sterilization equipment and surgical tools. New Brunswick, NJ-based J&J initiated 2016 full-year guidance for sales of $70.8 billion to $71.5 billion, short of analyst projections of $71.99 billion. Adjusted earnings per share was guided in a range of $6.43 to $6.58, exceeding analyst estimates of $6.40. The Street liked what it heard from JNJ and the shares moved higher by nearly 4% following the news. 

      A solid case can be made for Johnson & Johnson as a core holding for conservative, long-term investors with an interest in income. The company has a strong pharmaceutical pipeline and I like J&J’s impeccable finances, well-defined earnings stream and generous dividend yield of 3.1%.

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