Healthcare giant Johnson & Johnson (NYSE: JNJ – $133.34) posted higher than expected earnings for its second quarter, but fell short on sales. Excluding one-time charges, J&J said net income was equal to $1.83 per share, ahead of the consensus of $1.80 and 5.3% better than the year-ago period. Sales rose 1.9% to $18.8 billion, but below Street views of $18.9 billion. Excluding the net impact of acquisitions and divestitures, worldwide consumer product sales decreased 0.8% with domestic sales up 1.2% and international sales lower by 2.3%. Pharmaceutical sales – the company’s largest segment – decreased 0.2% to $8.6 billion with an operational increase of 1.0% and a negative impact from currency of 1.2%. J&J’s Medical Devices business had sales of $6.7 billion for the period, an increase of 4.9% versus the prior year.
Management said it expects a pick-up for the remainder of 2017, as new products launch and the company digests two big acquisitions. J&J recently closed on its $30 billion deal for Swiss biotech Actelion and its $ 4.3 billion acquisition of Abbott Laboratories’ eye-surgery equipment business. Also, earlier this month the company won approval for new psoriasis drug Tremfya, which analysts expect will be a blockbuster. The company raised its guidance for the full year and now expects sales of $ 75.8 billion to $76.1 billion and set earnings guidance for the year at $7.12 to $7.22 per share, compared with analysts’ consensus of $7.10. At current valuations, long-term total return potential isn’t as attractive as in the past, but conservative income investors will still find much to like here. The dividend was boosted earlier this year, currently yielding over 2.5%, and future rate hikes of about 9% annually are possible out to late decade.