J&J boosts sales, profits, but analysts wary

Johnson & Johnson ($JNJ) posted street-beating results for the second quarter, scoring sales gains in pharmaceuticals, consumer products and medical devices alike. But reaction to the numbers was mixed. Some analysts pointed out strong sales of new prescription meds and the first increase in consumer drug sales since early last year. But others mentioned some caveats.

Currency effects accounted for a sizable portion of the sales increases, Deutsche Bank's Kristen Stewart told Bloomberg. In addition, earnings beat analyst estimates mostly because of a lower tax rate than market-watchers were counting on, she said. "All considered, the beat wasn't that high quality in our minds," Stewart told the news service.

Meanwhile, JPMorgan Chase's Michael Weinstein told investors not to get too excited about any gains in J&J's consumer healthcare sales. After two years of repeated recalls that left store shelves bare of many key J&J products, the concern is that consumers who've been using substitutes for J&J meds will keep doing so as the pharma giant's brands return. Weinstein expects J&J's consumer drugs to continue to lag. "[T]he economy and store brands will continue to weigh on the segment," he said in a client note. "Customers continue to trade down to lower-priced brands."

Speaking of the recalls, J&J's board has decided to create a special committee to oversee the company's compliance and quality-control efforts, the Wall Street Journal reports. Among the committee's tasks would be keeping track of J&J's performance vis-à-vis an FDA consent decree, which sets out benchmarks for improvements at two plants and changes elsewhere in the company. The board declined, however, to join in on shareholder efforts to go after J&J officials for the company's recall-related woes.

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