Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Better Buy: J&J or Abbott?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Both Johnson & Johnson (NYSE: JNJ  ) and Abbott Labs (NYSE: ABT  ) released second-quarter earnings this week. Both said the strengthening dollar hurt revenue and sales in the second quarter. But unlike its diversified-health-care big brother, the negative effect didn't force Abbott to reduce its guidance.

The difference? Abbott was able to make up for the headwinds by running faster. Even with the negative impact, Abbott expects adjusted earnings growth of 8.4% at the midpoint of its 2012 guidance. Johnson & Johnson is expecting earnings to be essentially flat year over year.

As usual, it was Humira leading the charge. Sales increased 16.5%. Without the negative effect of the currency change, the growth would have been 23%. That's pretty amazing considering it's been on the market for nearly a decade and has stiff competition from Johnson & Johnson and Merck's (NYSE: MRK  ) Remicade, as well as Pfizer (NYSE: PFE  ) and Amgen's (Nasdaq: AMGN  ) Enbrel.

After Abbott breaks up, Humira is destined for the drug part of the company, to be called AbbVie, which is on track to be spun off at the end of the year. The new drugmaker is clearly going to be a hyper-growth company… until it isn't.

The worry continues to be whether Humira can stand up to oral rheumatoid arthritis drugs being developed by Pfizer and others. In the short term, I see them as only a minor threat, given how comfortable doctors are with prescribing Humira. Longer term, they could cut into sales substantially. And so could knock-off versions of Humira if Abbott isn't able to stop the FDA from going ahead with its plan to approve biosimilars.

Back to the comparison of Johnson & Johnson and Abbott: Both companies are expecting earnings of about $5 per share, but Johnson & Johnson's shares are marginally expensive. Johnson & Johnson's dividend is a little larger, but it's pretty clear that the higher growth that Abbott is experiencing isn't being priced in because investors aren't sure Abbott will be able to keep it up.

Better buy? Abbott has more potential, but is also more risky. Why not diversify and buy both?

Looking for more dividend ideas? Check out the Fool's new free report: "Secure Your Future With 9 Rock-Solid Dividend Stocks." Just click here to get your free copy.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson and Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Pfizer. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (1) | Recommend This Article (5)

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.

Add your comment.

Compare Brokers

Fool Disclosure

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: 1951118, ~/Articles/ArticleHandler.aspx, 10/21/2016 6:15:16 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 Moments ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

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

10/21/2016 4:00 PM
ABT $40.50 Down -0.24 -0.59%
Abbott Laboratorie… CAPS Rating: *****
JNJ $113.44 Down -1.43 -1.24%
Johnson and Johnso… CAPS Rating: ****
AMGN $158.51 Down -2.99 -1.85%
Amgen CAPS Rating: ****
MRK $61.20 Down -0.72 -1.16%
Merck and Co. CAPS Rating: ****
PFE $32.18 Down -0.36 -1.11%
Pfizer CAPS Rating: ****