Take It Away, J&J

Pharmaceutical and consumer products giant Johnson & Johnson (NYSE: JNJ  ) reported nice third-quarter earnings today. However, in the company's conference call, management admitted that next year will yield somewhat lower rates of top-line growth.

Third-quarter profit for Johnson & Johnson increased by 13% to $2.3 billion, or $0.78 per share, based in part on sales of prescription drugs. In addition, in its conference call, the company raised its outlook for the year based on the strong showing to $3.05 to $3.07 per share from $3.03 per share. Sales increased 10.5%, which includes currency impact of 2.8%.

Johnson & Johnson's strong suits in pharmaceuticals included such names as Risperdal, Duragesic, Topamax, Remicade, and Sporanox, among others. However, Duragesic, a pain patch, will soon face generic competition, and Procrit, for anemia, is already losing traction because of competition from Amgen (Nasdaq: AMGN  ) .

Meanwhile, the stent wars, which we watched closely last year, continue. J&J said that sales of its Cypher stent slowed because of competitive pressures from rivals such as Boston Scientific (NYSE: BSX  ) . In fact, sales of the Cypher stent decreased by 37%.

Although investors gave Johnson & Johnson shares a lift earlier today on the short-term good news, it wouldn't be the first time hints of slowing growth and competitive concerns have appeared. Investors would do well to keep their eyes on the company's pipeline and what new products may be on the way to ensure that it continues to deliver sales and earnings growth.

However, for long-term investors, or those who invest the Income Investor way, there are lots of things to like about Johnson & Johnson, including its historic stability, dividends, and wide product portfolio that provides some insulation against the ups and downs of the economy. Even though Johnson & Johnson has had a pretty successful year, investors should still keep a careful eye on 2005.

For more thoughts on Johnson & Johnson, be sure to check out Mathew Emmert's piece from March, "J&J Prescribes Growth and Income."

Johnson & Johnson pays dividends, a criteria for stocks recommended inMotley Fool Income Investor. Which stocks have made the pick list? Find out more here.

Alyce Lomax does not own shares of any of the companies mentioned.


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