J&J Will Recover -- Someday

Consumer health care might be the smallest of Johnson & Johnson's (NYSE: JNJ  ) three divisions, but a 15% drop in revenue still hurts. A lot.

The sharp fall was, of course, due to the seemingly never-ending recalls. The recalls aren't necessarily new issues; the company is going through every product, checking to make sure everything is perfect. It's a good move in the long run -- something it should have been doing all along -- but it's painful right now.

The recalls may not even be done yet. According to CEO William Weldon, most of it is behind the company, but there could be "a little bit" more. It's all relative, I guess.

The pharmaceutical division wasn't exactly firing on all cylinders either, registering a 4.7% fall in fourth-quarter sales. A 10% drop in U.S. sales of its anti-inflammatory Remicade, the company's top-selling drug, was a major component. Some of the drop could be from its new drugs -- Stelara for psoriasis and Simponi for rheumatoid arthritis -- cannibalizing Remicade sales, but U.S. sales of Abbott Labs' (NYSE: ABT  ) Humira, which treats the same indications, were up 13% in the fourth quarter, so it's not like everyone is having trouble.

Combine the consumer-division woes with the pharmaceutical problems, and a paltry 0.2% increase for the medical devices and diagnostics business, and the fourth-quarter revenue fell by 5.5%. The horrible quarter dragged down the 2010 year-over-year revenue change into the red as well -- the second year in a row that's happened.

Will Johnson & Johnson recover? Absolutely -- it's Johnson & Johnson, after all. When? It's hard to say.

If your timeframe is long enough, buying now might be OK. The beleaguered stock price has Johnson & Johnson's dividend yield at 3.5%. That's not bad, but if you're going to wait for growth to come back, you might as well go for a higher dividend from Pfizer (NYSE: PFE  ) or Bristol-Myers Squibb (NYSE: BMY  ) -- at least the timing of their recoveries from patent expirations are well established.

Want more dividend stock ideas? Click here to grab a free copy of the Fool's report "13 High-Yielding Stocks to Buy Today."

Johnson & Johnson and Pfizer are Motley Fool Inside Value choices. Johnson & Johnson is a Motley Fool Income Investor pick. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. The Fool owns shares of Johnson & Johnson. Motley Fool Alpha owns shares of Abbott Laboratories and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 27, 2011, at 4:06 PM, plange01 wrote:

    for the way j+j is being run its stock is extremely overpriced.this comany belongs in the mid $40 with another disaster boeing!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1429499, ~/Articles/ArticleHandler.aspx, 12/20/2014 10:35:15 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 17,804.80 26.65 0.15%
S&P 500 2,070.65 9.42 0.46%
NASD 4,765.38 16.98 0.36%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/19/2014 4:01 PM
ABT $46.05 Up +0.28 +0.61%
Abbott Laboratorie… CAPS Rating: *****
BMY $61.30 Up +0.51 +0.84%
Bristol-Myers Squi… CAPS Rating: ****
JNJ $105.55 Down -1.26 -1.18%
Johnson & Johnson CAPS Rating: *****
PFE $31.94 Down -0.03 -0.09%
Pfizer CAPS Rating: ****

Advertisement