Big-pharma earnings season has finally come, and what better way to start things off than with a Johnson & Johnson (NYSE:JNJ) earnings bonanza? The market's response to its earnings report was fairly muted, but that has basically been the story with JNJ for most of the past five years, with its steady but slow-growing top and bottom lines.

It's tough for a company to grow rapidly when it reaches a nearly $200 billion market cap and its revenues for the year are bigger than the annual gross domestic product of 126 countries. That said, sales for 2006 came in at $53 billion, up 5.6% versus 2005. Earnings gained almost 10% to $11 billion ($3.73 per share), and net margins were up 80 basis points to a healthy 20.7%. You can get the rest of the numbers in our Fool by Numbers report.

JNJ's most important segment by sales is its pharmaceutical products. For 2006, the segment accounted for 44% of all sales, but growth was anemic, at only 4.2% in both the U.S. and elsewhere in the world. The problem JNJ faces with its pharmaceutical sales is that some of its largest products, including its Duragesic pain-relieving patch, have lost or will be losing patent protection in the next year.

The company's Duragesic, Risperdal, and Procrit franchises represent more than one-third -- $8.7 billion -- of JNJ's total pharmaceutical product sales. Just to make up for the kneecapped sales of the Duragesic patch, which just started facing generic competition this year, means JNJ will have to pull another blockbuster out of its drug pipeline.

Why do I focus on the pharmaceutical segment sales so much? Because pharmaceuticals represent the company's biggest opportunity for revenue growth. Where else can a product have billions of dollars in sales in just a few years? This segment is also JNJ's biggest challenge, though, since the onset of better drugs or generic competitors can be so disastrous to sales. It's this volatility in sales that makes following the pharmaceutical segment so important for potential JNJ investors.

From an operational standpoint, I've always been a fan of JNJ's products, and in fact, I even have a few of them in my body. But I've always had concerns about the stock's valuation, as earnings growth has been slowing and several major products face challenging sales environments. In the stock market, everything is relative, and with other big-pharma competitors either trading at cheaper multiples or offering more potential for growth, JNJ is not my favorite pharmaceutical company at this point.

Johnson & Johnson is an Income Investor recommendation. To see what other dividend-paying stocks James Early is recommending, check out Income Investor free for 30 days.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.