Johnson & Johnson (JNJ) reported strong first-quarter results that slightly exceeded our expectations. However, we don't expect any changes to our fair value estimate based on the minor outperformance. Total sales increased 2% operationally, with strong growth from the drug division offsetting continuing weakness in the consumer business. On the bottom line, earnings per share increased 4%, supported by a lower tax rate. The company increased its full-year earnings per share forecast to $4.90-$5.00, up $0.10, partly based on the change in foreign exchange rates. We also believe the favorable settlement with Merck (MRK), which increased J&J's rights to immunology drugs Remicade and Simponi, gave management increased confidence in full-year results.
Johnson & Johnson's drug division posted 6% operational growth versus the prior-year period, supported by several new product launches. Psoriasis drug Stelara continues to outperform our expectations, and we now expect it will reach $1 billion in sales by 2012. With several new product launches coming in the next few quarters, we believe the drug division is well positioned for growth. We believe hepatitis C drug telaprevir and cardiovascular disease drug Xarelto (both with blockbuster potential) represent the largest near-term drug launches.
Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.