Johnson & Johnson NYSE:JNJ has been upgraded to a strong buy with a 2012 price target of $100 issued by Shayne Heffernan today.

In a note to traders Shayne Heffernan said that the company was undervalued and considering the Earnings Call the company should be trading over $100 in 2012.

Earnings Call Transcript

Operator

Good morning, and welcome to Johnson & Johnson’s First Quarter 2011 Earnings Conference Call. [Operator Instructions] This call is being recorded. If anyone has any objections, you may disconnect at this time. [Operator Instructions] I would now like to turn the conference call over to Johnson & Johnson. You may begin.

Louise Mehrotra

Good morning, and welcome. I’m Louise Mehrotra, Vice President of Investor Relations for Johnson & Johnson, and it is my pleasure, this morning, to review our business results for the first quarter of 2011. Joining me on the call today is Dominic Caruso, Vice President, Finance and Chief Financial Officer.

A few logistics before we get into the details. This review is being made available to a broader audience via webcast, accessible through the Investor Relations section of the Johnson & Johnson website. I’ll begin by briefly reviewing highlights of the first quarter for the corporation and highlights for the 3 business segments. Following my remarks, Dominic will provide some additional commentary on the first quarter results and guidance for the full year of 2011. We will then open the call to your questions. We expect the call to last approximately one hour.

Included with the press release that was sent to the investment community earlier this morning is the schedule showing sales for major products and/or business franchises to facilitate updating your models. These are also available on the Johnson & Johnson website, as is the press release.

Before I get into the results, let me remind you that some of the statements made during this call may be considered forward-looking statements. The 10-K for the fiscal year 2010 identifies certain factors that could cause the company’s actual results to differ materially from those projected in any forward-looking statements made this morning. The company does not undertake to update any forward-looking statements as a result of new information or future events or developments. The 10-K is available through the company or online.

Last item. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. These measures are reconciled to the GAAP measures and are available in the press release or on the Johnson & Johnson website.

Now I would like to review our results for the first quarter of 2011. If you would refer to your copy of the press release, let’s begin with the schedule titled Supplementary Sales Data by geographic area. Worldwide sales to customers were $16.2 billion for the first quarter of 2011, up 3.5% as compared to the first quarter of 2010. On an operational basis, sales were up 1.8%, and currency had a positive impact of 1.7%.

In the U.S., sales declined 0.6%. In regions outside the U.S., our operational growth was 4.1%, while the effective currency exchange rates positively impacted our reported results by 3.2 points. The Western Hemisphere excluding U.S. grew by 7.3% operationally, while the Asia-Pacific, Africa region grew by 6.3% on an operational basis. Europe grew 1.9% operationally.

If you’ll now turn to the Consolidated Statement of Earnings. Net earnings were $3.5 billion compared to $4.5 billion in the same period in 2010. Earnings per share were $1.25 versus $1.62 a year ago. Please direct your attention to the boxed section of the schedule, where we have provided earnings information adjusted to exclude special items.

As referenced in the footnote, first quarter results this year were adjusted to exclude the after-tax impact of litigation expense and additional DePuy ASR Hip recall costs. The first quarter results in 2010 were adjusted to exclude the after-tax impact of the net gain from litigation matters. Net earnings on an adjusted basis were $3.7 billion and earnings per share were $1.35, up 3.6% and 4.7%, respectively, versus the first quarter of 2010.

I would now like to make some additional comments relative to the components leading to earnings before we move on to the segment highlights. Cost of goods sold at 29.5% of sales was 50 basis points higher than the same period in 2010, primarily due to the ongoing remediation work in our OTC business.

Selling, marketing and administrative expenses at 31.3% of sales were up 80 basis points due to investment spending in our MD&D [Medical Devices and Diagnostics] business as well as the fee on our branded pharmaceutical products included as part of the U.S. Health Care Reform legislation. Our investment in research and development as a percent of sales was 10.8%, up 80 basis points versus the first quarter of 2010, due primarily to the timing of milestone payments.

Interest expense net of interest income of $104 million was up $23 million versus the first quarter of 2010, due to a higher average debt balance. Other income net of other expense was $13 million in the first quarter of 2011 compared to $1.6 billion in the same period last year. Excluding special items, net other income was $359 million versus $97 million a year ago. Dominic will discuss this item during his remarks. Excluding special items, taxes were 22.8% in the first quarter of 2011, in line with our guidance.

Turning now to business segment highlights. Please refer to the supplementary sales schedule highlighting major products or business franchises. I’ll begin with the Consumer segment.

Worldwide Consumer segment sales for the first quarter of 2011 of $3.7 billion decreased 2.2%, as compared to the same period last year. On an operational basis, sales declined 4.1%, while the impact of currency was positive 1.9 points. U.S. sales were down 13.8%, while international sales grew 2.6% on an operational basis. Excluding the impact of lower over-the-counter or OTC revenues, operational sales declined approximately 1%.

For the first quarter of 2011, sales for the OTC Pharmaceuticals and Nutritionals decreased 8.2% on an operational basis compared to the same period in 2010, with U.S. sales down 26.8%.

During the quarter, McNEIL-PPC announced the signing of a Consent Decree covering the manufacturing facilities in Las Piedras, Puerto Rico and Fort Washington and Lancaster, Pennsylvania. The Consent Decree allows McNeil to continue work already initiated under the Comprehensive Action Plan or CAP and identifies procedures that will help provide additional assurance of product quality to the FDA.

McNeil will continue to operate the manufacturing facilities in Las Piedras and Lancaster and will work with an independent expert who will inspect these sites, issue recommendations and review production and quality processes. Production volumes shipped from these facilities are expected to be impacted during the initial implementation of these reviews and approval processes. Shipments of key products are expected to ramp up during the latter part of 2011.

McNeil will not reopen the Fort Washington facility until it has first completed the remediation efforts at the facility, received certification of compliance from the independent expert and then receives approval from the FDA.

Regarding the products previously produced at this facility, we are in the process of transferring the production to other sites. We began shipping a small amount of product in the fourth quarter of 2010 and ultimate supply of certain key products will begin late in 2011. The broader portfolio of products is expected to be available in 2012, later than previously anticipated. This is due to a decision to upgrade and reformulate manufacturing and quality methods in the course of transferring the production to other sites.

Sales of OTC and Nutritional products outside the U.S. were up 6.9% on an operational basis. Fluctuations in retail inventory levels favorably impacted the quarterly comparisons. Additionally, strong market growth in certain regions positively impacted growth in the quarter.

Our Skin Care business declined on an operational basis by 3.7% in the first quarter of 2011, with sales in the U.S. down 5.8% and sales outside the U.S. down 1.7% on an operational basis.

As previously discussed, sales have been impacted by lower production volumes due to the enhancements to equipment and manufacturing processes which began in the latter half of 2010. Shipments and retail inventory levels are expected to normalize toward the end of the second quarter.

Baby Care products achieved operational growth of 3.1% when compared to the first quarter of 2010, due primarily to growth in cleansers, wipes and powders outside the U.S.

Women’s Health declined 4% on an operational basis. Sales in the U.S. were down 14.4%, while sales outside the U.S. were up on an operational basis by 0.7%. Lower sales of K-Y products and the divestiture of the e.p.t. brand impacted growth in the quarter.

Sales in the Oral Care franchise were flat on an operational basis. In the U.S., sales were down 6.3%, reflecting the impact of competition, including private label, for certain products. Sales outside the U.S. increased by 0.6% operationally, driven by strong growth for LISTERINE.

Wound Care/Other was down 8.4% on an operational basis compared to the same period last year due to increased competition, compounded by the divestiture of PURELL announced in the fourth quarter of 2010.

That completes the review of the Consumer segment, and I’ll now review the highlights for the Pharmaceuticals segment.

Worldwide net sales for the first quarter of $6.1 billion were up 7.5% versus the same period last year. On an operational basis, sales were up 6.4%, with a positive currency impact of 1.1 points. Sales in the U.S. increased 5.8%, while sales outside the U.S. increased, on an operational basis, by 7.3%.

The first quarter sales comparisons were negatively impacted by approximately $60 million in incremental rebates due to the U.S. Health Care Reform legislation implemented late in the first quarter of 2010. Additionally, European austerity measures, primarily implemented in the second half of 2010, impacted the first quarter comparisons by a similar amount. Excluding these items, the underlying operational growth was approximately 8.5%.

Now reviewing the major products. Sales of our key immunology products, which include REMICADE, STELARA and SIMPONI were up nearly 18% versus 2010. Sales in the U.S. were up approximately 8% when compared to the first quarter of 2010, with REMICADE up 1%; STELARA up 88% and SIMPONI up 36%. With the strong growth achieved by STELARA and SIMPONI, we continue to be the market leader in immunology in the U.S.

Export sales of REMICADE were up 22.5%, reflecting both double-digit market growth, as well as the expected increase in 2011 to 42% from 40% for the division-of-contribution income split per the previous distribution agreement. The amended distribution-agreement division-of-contribution income split of 50% will go into effect July 1, 2011. The success of the international launches resulted in the significant growth of export sales for SIMPONI and international sales for STELARA.

Sales of LEVAQUIN, our anti-infective, were up 16.9% on an operational basis when compared to the same period a year ago. The U.S. anti-infective market was estimated to be up over 8% in the quarter due to higher incidence of respiratory illness and flu. Of note, the U.S. marketing exclusivity for LEVAQUIN will expire on June 20 this year.

RISPERDAL CONSTA, a long-acting injectable antipsychotic, achieved first quarter sales growth of 5.5% on an operational basis. Sales in the U.S. were down 2.6%. However, the total U.S. sales of our long-acting injectables, including INVEGA SUSTENNA, increased strong double digits versus a year ago, due to an increase in combined market share. Sales of RISPERDAL CONSTA outside the U.S. were up 9.1% operationally, with strong growth in most major regions.

PROCRIT/EPREX declined operationally by 24.6% during the quarter as compared to the same period last year, with PROCRIT down 34.5% and EPREX down 12.3%, operationally. A softening of the market and increased competition has contributed to the lower sales results. PROCRIT results were also impacted by a reduction to retail inventory levels.

CONCERTA, a product for Attention Deficit Hyperactivity Disorder, increased 8.8% operationally in the first quarter as compared to the same period last year, with sales in the U.S. up 10% due to strong market growth, partially offset by lower market share. Sales outside the U.S. were up 6.3% operationally, with solid growth seen in most major regions.

As a reminder, last quarter, we announced a supply and distribution agreement with Watson Laboratories, Inc. to distribute an authorized generic version of CONCERTA in the U.S., effective May 1, 2011.

VELCADE, a treatment for multiple myeloma, is being co-developed with Millennium Pharmaceuticals. We have commercialization rights in Europe and the rest of the world outside the U.S. Operational sales growth was 5.6%. Slower sales in Europe due to price pressure and increased competition were offset by strong growth in other regions.

PREZISTA, a protease inhibitor for the treatment of HIV, grew operationally 41.9%, with similar results both in and outside the U.S. due to very strong momentum in share.

ACIPHEX, as it’s known in the U.S. market, and PARIET outside the U.S. is a proton pump inhibitor or PPI that we co-market with Eisai. On an operational basis, sales were down 8.6% due to increased penetration of generics in the category.

DOXIL/CAELYX grew 71.6% in the quarter. With the expiration at year end 2010 of the distribution agreement with Merck, we are now marketing DOXIL/CAELYX globally.

INTELENCE, an NNRTI for the treatment of HIV, grew operationally 25.1% due to an increase in market share.

INVEGA, an atypical antipsychotic, grew operationally 10.1% due to very strong growth outside the U.S. with the recent approval in Japan.

As an update on the Pharmaceutical pipeline, we have completed a number of submissions and received a number of approvals. At the end of February, we submitted to the FDA the response to the Complete Response letter for NUCYNTA extended release tablets. We have been assigned a 6-month review.

The VELCADE subcutaneous dossier was submitted to the European Medicines Agency. XEPLION, paliperidone palmitate, received approval from the European Commission for the treatment of schizophrenia. The European Commission approved once-daily dosing over PREZISTA for the treatment of HIV in treatment-experienced adult patients. The revised dosing extends the same dosing already available for treatment-naïve patients.

The FDA approved INVEGA for the treatment of schizophrenia in adolescents 12 to 17 years of age. And SIMPONI received approval from the European Commission for structural damage in RA [rheumatoid arthritis] and a positive opinion from the CHMP for structural damage in psoriatic arthritis. Also during the quarter, we announced the pending sale of the Janssen animal health business.

I’ll now review the Medical Devices & Diagnostics segment results. Worldwide Medical Devices & Diagnostics segment sales of $6.4 billion grew 1.3% operationally, as compared to the same period in 2010. Currency had a positive impact of 2 points, resulting in total sales increase of 3.3%. Sales in the U.S. were down 0.5%, while sales outside the U.S. increased on an operational basis by 3%.

Now turning to the franchises, starting with Cordis. Cordis sales were down 7.5% operationally, with the U.S. down 3.6% and sales outside the U.S. down 9.9% operationally. Cordis results were impacted by lower sales of CYPHER, our sirolimus-eluting stent, partially offset by the strong growth in our Biosense Webster business.

CYPHER sales were down 41% on an operational basis versus the prior year, and estimated worldwide share for the quarter was 12%, down 2 points sequentially and down 6 points from the first quarter of 2010.

Biosense Webster, our electrophysiology business, achieved strong operational growth of 18% in the quarter due to increased market share. The continued success of CARTO 3 and expansion of the installed base made strong contributions to the results.

The DePuy franchise had operational growth of 1.7%, when compared to the same period in 2010, with the U.S. down 0.4% and the business outside the U.S. growing by 4.2%, operationally. Low single-digit pressure on pricing continued as a result of the economic trends with positive mix mitigating some of the impact.

Incremental sales from the acquisition of Micrus contributed to the growth in the quarter. The rate of growth was negatively impacted by very strong results in the first quarter last year, particularly in the U.S. The U.S. markets softened through the balance of 2010. On a sequential basis, sales were up both on a worldwide basis and in the U.S.

Operationally, hips were down 2% on a worldwide basis with the U.S. down 6% and sales outside the U.S. up 3%. Growth was impacted by lower volume of metal-on-metal bearings and continued pricing pressure.

On a sequential basis, hips grew approximately 4% in the U.S. and 8% operationally outside the U.S. Mix positively impacted the sequential trends, as well as the success of the cementless systems.

Knees declined 4% on an operational basis, with the U.S. down 6% and sales outside the U.S. down 1%. On a sequential basis, knees were up 1% in the U.S. Continued softness in the market continues to temper the rate of growth. Outside the U.S., on an operational basis, knees were up 5% sequentially due to the success of the Sigma Fixed Bearing Knee.

The Diabetes franchise was up 6% operationally in the first quarter of 2011, with the U.S. business up 7.2% and the business outside the U.S. up 4.9% operationally. Increased market share was the major driver of growth.

Ethicon worldwide sales grew operationally by 2.3%, with the U.S. up 1.2% and sales outside the U.S. up 3.3% operationally. Sutures, Women’s Health and Acclarent were the major growth drivers this quarter.

Ethicon Endo-Surgery achieved operational growth of 2.4% in the first quarter of 2011, with U.S. sales down 2.5% and sales outside the U.S. up 6% operationally. Growth was negatively impacted by the divestiture of the Breast Care business. Excluding this impact, worldwide sales grew approximately 5%. Growth was driven by increased market share for advanced sterilization products as well as HARMONIC products, and outside the U.S., Endo and EnSeal products.

Ortho Clinical Diagnostics declined 2.5% on an operational basis in the first quarter. Sales in the U.S. declined 8%, while sales outside the U.S. were up 4.1% on an operational basis. Sales were impacted by timing of shipments, as well as lower sales and donor screening due to the moot selective testing in the U.S. for Chagas’ disease. This was partially offset by the continued strong growth in clinical labs due to the strength of the VITROS 5600 and 3600 platforms.

Rounding out the review of the Medical Devices & Diagnostics segment, our Vision Care franchise achieved operational sales growth of 4.7% in the first quarter compared to the same period last year. Sales in the U.S. increased 2.8%, while sales outside the U.S. increased 5.9% on an operational basis. ACUVUE TruEye and the astigmatism lenses were strong contributors to the quarter.

That completes highlights for the Medical Devices & Diagnostics segment and concludes the segment highlights for Johnson & Johnson’s first quarter of 2011.

I’ll now turn the call over to Dominic Caruso. Dominic?

Dominic Caruso

Thank you, Louise, and good morning, everyone. I would like to provide some comments this morning about our first quarter results, highlight some recent business and pipeline developments, and provide guidance for you to consider in refining your models for 2011.

I’m pleased to report that we are off to a good start in 2011, with solid sales growth for the enterprise. Although the utilization in the healthcare markets continues to be below prerecession levels, we are seeing some sequential improvements in the comparisons to prior year. We are also seeing continued progress with our new product launches and our sales in emerging markets.

Our Pharmaceuticals business demonstrated strong operational sales growth this quarter of over 6%, due to the success of our recently launched products such as STELARA and SIMPONI and core medicines such REMICADE and PREZISTA.

Our Medical Device businesses saw modest sales growth in the first quarter, which was in line with market expectations for this sector. This reflects tough comparisons to the first quarter of 2010, which was prior to the slowdown in the overall markets for this sector.

And our Consumer Healthcare business saw sequential improvements in its operational sales growth versus the fourth quarter of 2010 in various markets, excluding the impact of the plant shutdown and the lower production levels in our McNeil U.S. over-the-counter business, where we are making good progress in addressing the manufacturing and quality issues in that business.

As to earnings, we are very pleased to have reported solid earnings per share in the first quarter of $1.35, excluding special items, which is higher than the latest estimates published by First Call. This quarter, we recorded reserves related to litigation matters and the ASR Hip recall. We reflected these charges as special items, and we will continue to exclude them from our guidance.

We continued to make investments this past quarter to advance our robust pipelines, launch new products and make necessary enhancements to our manufacturing and quality systems, particularly in our McNeil OTC business. These investments are expected to increase through the remainder of the year, and I will comment on that further when providing guidance for you to consider in refining your models.

We continue to see many positive developments and growth opportunities across our businesses. For example, in the first quarter, we filed a new drug application with the FDA for rivaroxaban for the prevention of stroke and systemic embolism in patients with non-valvular atrial fibrillation. We also received approval for XEPLION, or paliperidone palmitate, in Europe for the treatment of schizophrenia. This compound is currently market as INVEGA SUSTENA in the U.S.

And in the Infectious Disease space, we continue to expand our pipeline. We recently announced positive results from a study of telaprevir and also initiated Phase III clinical trials of TMC435.

We also added to our Infectious Disease portfolio in the first quarter by completing the acquisition of Crucell. Crucell now operates as the center for vaccines within our Pharmaceuticals group, focused on R&D, production and marketing of vaccines and antibodies against infectious disease worldwide. We are very pleased to welcome the talented people of Crucell to the Johnson & Johnson family of companies.

In connection with the acquisition and under current accounting standards, we recorded a gain in the other income and expense line in the first quarter related to our earlier investment in Crucell. However, as we indicated when we announced this acquisition agreement, we expect the operations of Crucell to have a dilutive impact of $0.03 to $0.05 per share, which we will see in the remaining quarters of this year, essentially offsetting this gain.

In recent weeks, we also announced several developments that I would like to comment on. In March, our McNeil Consumer Healthcare business finalized the terms of a Consent Decree with the U.S. Food and Drug Administration for 3 manufacturing facilities. We had previously included in our guidance for 2011 an impact of approximately $0.06 per share from of the ongoing remediation efforts at McNeil. Now that we have finalized the terms of the Consent Decree, we estimate that, that impact will be twice that amount. This results from both the slowdown in sales reflecting the impact on production volumes as we implement the additional quality steps outlined in the Decree, as well as additional investments required in the remediation process.

In April, we announced a settlement with the U.S. Department of Justice, the U.S. Securities and Exchange Commission and the U.K. Securities Fraud Office (sic) [Serious Fraud Office] for matters related to Foreign Corrupt Practices Act investigations and the United Nations Oil-for-Food program. We will pay nearly $80 million in connection with these matters, an amount that was previously reserved for.

Details on these matters have been widely reported, and we’ve accepted full responsibility for the shortcomings in our McNeil consumer manufacturing operations and for the actions related to these other investigations. We are confident that these matters are not representative of the vast majority of the Johnson & Johnson employees around the world.

While there are clear implications and commitments from these matters that carry forward under the Consent Decree and the Deferred Prosecution Agreement, we have already been addressing these issues and have a clear path forward. As always, we are focused on what is most important to us: serving the millions of people around the world who rely on our products everyday to meet their healthcare needs.

And finally, just last week, we reached an amended agreement with Merck concerning the distribution rights for REMICADE and SIMPONI, concluding the arbitration proceedings that began back in 2009. We are very pleased to have reached this agreement and are working very closely with Merck to make certain that this is a seamless transition for the patients and healthcare providers who rely on these treatments.

Beginning July 1, 2011, Merck will relinquish the distribution rights to REMICADE and SIMPONI in 150 territories, including Canada, Brazil, Australia and Mexico. And Merck will pay Johnson & Johnson $500 million. The distribution of contribution income will move to a 50-50 split effective July 1, 2011. This was previously scheduled to reach that level in 2014. This compares to the current split of 42% to Johnson & Johnson and 58% to Merck prior to the amendment.

This is obviously a very positive development for our business. However, the financial impact to 2011 earnings is not expected to be significant due to transitional matters and the fact that we expect to take this opportunity to invest for future growth.

Before I begin commenting on guidance, I would also like to take a moment and express our deep concern for the citizens of Japan, who are recovering from the recent disasters there. Our thoughts and prayers are with them. I’m happy to report that all of our Johnson & Johnson employees in Japan remain safe, and our focus is now firmly on providing support to the relief efforts in terms of financial contributions and considerable product donations of medical supplies and consumer hygiene products that we traditionally provide in such times of needs. The efforts and resilience of our employees in Japan have been truly remarkable.

We are returning operations in Japan to business as usual wherever possible, but there is still more work to do. It will be premature to estimate any potential financial impact at this stage. We will continue to gather more information and provide updates in the future.

Now let me provide some guidance for you to consider as you refine your models for 2011. My comments will reflect the net impact of the items I mentioned earlier, namely, the acquisition of Crucell, the McNeil Consumer Healthcare Consent Decree and the amended agreement with Merck.

Let me begin with a discussion of cash and interest income and expense. At the end of the first quarter, we had over $9 billion of net cash. This consists of approximately $27 billion of cash and investments and approximately $18 billion of debt. We used approximately $2.5 billion to fund the Crucell acquisition during the quarter, and we continue to generate strong cash flows.

For purposes of your models, assuming no additional major acquisitions during 2011, I suggest you consider modeling net interest expense of between $300 million and $400 million, consistent with our previous guidance.

Turning to other income and expense. As a reminder, this is the account where we record royalty income as well as onetime gains and losses arising from such items as litigation, investments by our development corporation and asset sales or write-offs. This account is difficult to forecast, but assuming no major onetime gains or losses and excluding the impact of the special items I referred to earlier, I would recommend that you consider modeling other income and expense for 2011 as a net gain ranging from approximately $700 million to $800 million. This is higher than our previous guidance due to the fact that we have now included the impact of the Crucell acquisition.

As I noted earlier, in the first quarter, we recorded a gain related to our previous investment in Crucell in this line item on the P&L. However, the dilutive impacts of the operations of Crucell of approximately $0.03 to $0.05 per share will be seen in other line items on the P&L during the remainder of the year, thus offsetting this gain.

And now a word on taxes. For the first 3 months of 2011, the company’s effective tax rate, excluding special items, was 22.8%. We suggest that your models reflect an effective tax rate for 2011 in the range of 22% to 23%, consistent with our previous guidance. As always, we will continue to pursue opportunities in this area to improve upon this rate throughout the year.

Now let’s turn to sales and earnings guidance. As a reminder, my comments will reflect the net impact of the items I mentioned earlier, namely, the acquisition of Crucell, the McNeil Consumer Healthcare Consent Decree impact and the amended agreement with Merck.

Our guidance continues to be based first on a constant-currency basis reflecting our results from operations, assuming that average currency rates for 2011 will be the same as they were for 2010. This is the way we manage our business, and we believe this operational view provides a good understanding of the underlying performance of our business. We will also continue to provide an estimate of our sales and EPS results for 2011 with the impact that current exchange rates could have, using the euro as an example.

Turning to sales. We would be comfortable with your models reflecting an operational sales increase, on a constant-currency basis, of between 2.5% and 3.5% for the year. This is higher than our previous guidance, reflecting the net impact of the developments I previously mentioned. This would result in estimated sales for 2011, on a constant-currency basis, of approximately $63.5 billion.

While we are not predicting the impact of currency movements, to give you an idea of the potential impact, if currency exchange rates for the remainder of 2011 were to stay where they were as of last week, as an example, with the euro at approximately $1.44, then our sales growth rate will be positively impacted by approximately 3% for the year. Thus, under this scenario, we would expect reported sales growth to be between approximately 5.5% and 6.5% for the year for a total expected level of reported sales of $65.5 billion, higher than our previous guidance.

Now turning to earnings. I suggest that you consider full year 2011 operational EPS estimates of between $4.74 and $4.84 per share, excluding the impact of special items and assuming the same average exchange rates for 2011 as we saw in 2010. This increase reflects the net impact of the recent developments that I discussed earlier, as well as the fact that we are off to a good start in 2011.

While we are not predicting the impact of currency movements, to give you an idea of the potential impact on EPS, if currency exchange rates for the balance of 2011 were to remain where they were as of last week, then the impact of currency movements, primarily the euro, would be favorable by approximately $0.16 per share, an increase of $0.08 per share from our previous guidance. Therefore, our reported EPS, excluding special items, would be between $4.90 and $5 per share for a reported EPS growth rate of approximately 3% to 5%. This is higher than our previous guidance.

That concludes my comments on our operating performance this quarter and our guidance with respect to your models. Now Louise, back to you for some Q&A.

About Johnson & Johnson NYSE:JNJ

Johnson & Johnson, incorporated in 1887, is a holding company. The Company and its subsidiaries are engaged in the research and development, manufacture and sale of a range of products in the health care field. It has more than 250 operating companies conducting business worldwide. The Company’s operating companies are organized into three business segments: Consumer, Pharmaceutical and Medical Devices and Diagnostics. The Company and its subsidiaries operate 139 manufacturing facilities occupying approximately 21.8 million square feet of floor space. Within the United States, 7 facilities are used by the Consumer segment, 11 by the Pharmaceutical segment and 36 by the Medical Devices and Diagnostics segment.

Consumer

The Consumer segment includes a range of products used in the baby care, skin care, oral care, wound care and women’s health care fields, as well as nutritional and over-the-counter pharmaceutical products, and wellness and prevention platforms. The baby care franchise includes the JOHNSON’S Baby line of products. The brands in the skin care franchise include the AVEENO; CLEAN & CLEAR; JOHNSON’S Adult; NEUTROGENA; RoC; LUBRIDERM; DABAOtm; and Vendome product lines. The oral care franchise includes the LISTERINE and REACH oral care lines of products. The wound care franchise includes BAND-AID brand adhesive bandages and Neosporin First Aid products. The brands in the women’s health franchise are the CAREFREE Pantiliners; o.b. tampons and STAYFREE sanitary protection products. The nutritional and over-the-counter lines include SPLENDA, No Calorie Sweetener; the broad family of TYLENOL acetaminophen products; SUDAFED cold, flu and allergy products; ZYRTEC allergy products; MOTRIN IB ibuprofen products, and PEPCID AC Acid Controller from Johnson & Johnson Merck Consumer Pharmaceuticals Co. These products are marketed to the general public and sold both to retail outlets and distributors worldwide.

Pharmaceutical

The Pharmaceutical segment includes products in therapeutic areas, which include anti-infective, antipsychotic, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management and virology. These products are distributed directly to retailers, wholesalers and health care professionals for prescription use. The products in the pharmaceutical segment include REMICADE (infliximab), a treatment for a number of immune mediated inflammatory diseases; STELARA (ustekinumab), a treatment for moderate to severe plaque psoriasis; SIMPONI (golimumab), a treatment for adults with moderate to severe rheumatoid arthritis, psoriatic arthritis, and ankylosing spondylitis; VELCADE (bortezomib), a treatment for multiple myeloma; PREZISTA (darunavir) and INTELENCE (etravirine), treatments for HIV/AIDS; NUCYNTA (tapentadol), a treatment for moderate to severe acute pain; INVEGA SUSTENNAtm (paliperidone palmitate), for the acute and maintenance treatment of schizophrenia in adults; RISPERDAL CONSTA (risperidone), a treatment for the management of Bipolar I Disorder and schizophrenia; PROCRIT (Epoetin alfa, sold outside the United States as EPREX), to stimulate red blood cell production; LEVAQUIN (levofloxacin) for the treatment of bacterial infections; CONCERTA (methylphenidate HCl), a treatment for attention deficit hyperactivity disorder; ACIPHEX/PARIET, a proton pump inhibitor co-marketed with Eisai Inc., and DURAGESIC/Fentanyl Transdermal (fentanyl transdermal system, sold outside the United States as DUROGESIC), a treatment for chronic pain that offers a delivery system.

Medical Devices and Diagnostics

The Medical Devices and Diagnostics segment includes a range of products distributed to wholesalers, hospitals and retailers, used principally in the professional fields by physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. These products include Biosense Webster’s electrophysiology products; Cordis’ circulatory disease management products; DePuy’s orthopaedic joint reconstruction, spinal care, neurological and sports medicine products; Ethicon’s surgical care, aesthetics and women’s health products; Ethicon Endo-Surgery’s minimally invasive surgical products and advanced sterilization products; LifeScan’s blood glucose monitoring and insulin delivery products; Ortho-Clinical Diagnostics’ professional diagnostic products, and Vistakon’s disposable contact lenses. Distribution to these health care professional markets is done both directly and through surgical supply and other dealers.

	Company	Industry	Sector	S&P 500
Quick Ratio (MRQ)	–	1.67	1.75	0.64
Current Ratio (MRQ)	–	2.12	2.15	0.97
LT Debt to Equity (MRQ)	–	15.52	16.80	101.19
Total Debt to Equity (MRQ)	–	18.40	21.48	145.72
Interest Coverage (TTM)	49.18	4.54	2.06	17.74

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

www.livetradingnews.com

For More Information Contact

Chutinush Taksinapinunt (ANISTA)

Business Development Director

Heffernan Capital Management

Info@Heffcap.com

Join the HCM Sophisticated Investor List

Suite 53 Athenee Tower 63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 THAILAND

Tel: +66 2 126 8045

Fax: +66 2 126 8080

Mobile: +66 8 5997 0635

Email : info@heffcap.com

New York

347 5th Avenue, Suite 1402-508 NY, NY 10016

Tel: +1 646-403-9881

Fax: +1 646-403-8014

Singapore

3 Raffles Place #07-01 Bharat Building Singapore 048617

Tel: +65 6329 6408

Fax: +65 6329 9699

Info@Heffcap.com

Get the Updates Daily

Enter your email address:
Delivered by FeedBurner

Free Trial: HCM Pro Trader Platform

Your use of any of the Websites or any of the Services (defined below) constitutes your agreement to be bound by and comply with the Website Terms and Conditions and your consent to the collection, use and disclosure of personal information as described in the Privacy Policy. If you do not so agree and consent, you are not authorized to visit or use our Websites or the Services.

Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. You must also accept that opinions on stock markets change minute to minute, opinions expressed my change at any time without warning. Opinions maybe influenced by ad sales and other financial consideration. This site does not offer any assistance in making financial decisions.

Read the Terms of Service

Posted by Shayne Heffernan on Apr 23rd, 2011and filed underEquities, Latest News, Markets, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site