Both Johnson & Johnson
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
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?
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