J&J Disappoints while KO Beats Estimates


J&J Disappoints while KO Beats Estimates

Johnson & Johnson (NYSE:JNJ) reports second quarter net profits have declined by 49 percent to $1.4 billion, or 50 cents per share on acquisition cost, due unfavorable foreign exchange rates. As a result, the world’s largest health care products manufacturer lessened its earnings forecast for 2012.

Its current forecast was lowered from $5.07 per share to $5 per share. During the second quarter, the company’s revenue declined by 0.7 percent to $16.5 billion. The company explained that the foreign currency fluctuations affected 4.2 percent of its earnings.

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Bloomberg’s data showed that the average estimate of 21 analysts for J&J’s profit, excluding some items beat by 1 cent, at $1.29 per share. The company’s sales in the United States fell by 1.2 percent, while 26 percent of its revenue is generated from Europe.

According to Tony Butler, an analyst from Barclays Capital Inc.,  he doesn’t care about the currency, but he considers the business strategy of the company. He said, “Looking at the business outside the effect of foreign exchange rates, J&J is on the mend.”

Last April, Alex Gorsky took over as Chief Executive Officer of the company. He started implementing strategies to improve the company’s revenue, damaged by 50 product recalls for the past two years. Sales for some of J&J’s top-selling drugs also fell due to generic competition. Analysts expect Gorsky to be able to maneuver the company’s towards sales growth during the next few quarters.

Last June, U.S. regulators approved the company’s acquisition of Synthes Inc., a maker of tools and implants to treat damaged bones. J&J gained 1.2 percent in operational sales from Synthes.

J&J lost U.S. patent protection for Concerta and Levaquin. Concerta is a drug for attention deficit disorder while Levaquin is an antibiotic. The company’s second quarter sales fell for both drugs last year.  Sales for Concerta decline by 23 percent to $268 million, while sales for Levaquin dropped by 90 percent to $16 million.  J&J’s Remicade, its top selling rheumatoid drugs, helped to offset the company losses. The drug maker’s revenue generated from Remicade increased by 13 percent to $1.5 billion.

J&J Disappoints while KO Beats Estimates

On the other hand, The Coca-Cola Company (NYSE:KO)’s net income for the three months ending in June 29 is $2.79 billion, or $1.21 per share. The result is slightly lower than its $2.8 billion, or $1.20 per share last year.

The company explained that their revenue for the second quarter is less, due to the increasing costs of ingredients. The company lowered its ingredients expenditures to $300 million from $350-450 million in its previous forecast. Last year, Coca Cola’s Chief Executive Officer, Muhtar Kent, increased prices for its products to offset the higher costs of ingredients. The pricing for beverages in North America went up by 5 percent.

Judy Hong, an analyst from Goldman Sachs Group, Inc. (NYSE:GS), said that Coca Cola’s profitability in North America is improving because of better pricing and cost reductions. Hong recommended buying the shares.

Billionaire investor Warren Buffets holds large shares in Johnson & Johnson and Coca Cola.