Prolonged stock market declines are good for something: They make stand-out companies truly stand out. Johnson & Johnson(NYSE: JNJ) is one such company.

J&J reported record fourth-quarter sales of $9.4 billion, up 14.3%. For all of 2002, sales rose 12.3% to $36.3 billion, and net earnings increased 17% to $6.7 billion. Profit margins were all up from last year: gross margin, 71%; operating margin, 26%; net, 18%

Continued strong sales of anemia drugs drove pharmaceutical sales 15% higher last year, to top $17 billion. Drugs are usually the star at J&J, but it may be medical devices this year.

Medical device sales rose 13% to $12.6 billion last year. This spring, J&J expects to launch Cypher in North America, a drug-coated stent that promises J&J the lion's share of a billion-dollar market for at least the intermediate term. Annual stent sales are expected to at least double from $2 billion following the introduction of drug-coated stents.

Management professed comfort with 2003 earnings-per-share estimates of $2.62, up 17% on about 11% sales growth, but it warned against raising estimates. An expected slowdown in drug sales will likely staunch any upside surprises in 2003. At $54 per share, J&J sits at 24.7 times past earnings and 20.6 times 2003 estimates. It's at about 21 times free cash flow (FCF).

Here's annual growth in...

  Sales   Oper. Inc.   FCF
1999    14.7%     35.6%      17.2%
2000     6.5%     16.8%      27.2%
2001    10.5%     14.9%      36.8%
2002    12.3%     21.1%      25%-30% (est.)

Having grown during an economic downturn (so far) and a stock market collapse, J&J is all the better prepared for the economic upturn that should eventually follow. So, when the market tumbles and you want investment ideas, consider what's left standing.