Johnson & Johnson Earnings: Margins Keep Shrinking as Net Income Drops

S&P 500 (NYSE:SPY) component Johnson & Johnson (NYSE:JNJ) reported its results for the fourth quarter. Johnson & Johnson is a holding company involved in the research and development, manufacture and sale of a range of health care products.

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Johnson & Johnson Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for Johnson & Johnson fell to $218 million (8 cents per share) vs. $1.94 billion (70 cents per share) a year earlier. This is a decline of 88.8% from the year earlier quarter.

Revenue: Rose 3.9% to $16.25 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: JNJ reported adjusted net income of $1.13 per share. By that measure, the company beat the mean estimate of $1.10 per share. Analysts were expecting revenue of $16.28 billion.

Quoting Management: “We delivered solid results for 2011, built on the strong growth of our recently launched pharmaceutical products, and continued the steady momentum of new product approvals across all our businesses,” said William C. Weldon, Chairman and Chief Executive Officer. “Our talented people are focused on bringing meaningful innovations to patients and customers to address significant unmet needs, positioning us well to deliver sustainable leadership and profitable growth in health care.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 0.6 percentage point to 67.2% from the year earlier quarter. Over that time, margins have contracted on average 0.7 percentage point per quarter on a year-over-year basis.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 3 cents in the third quarter, by 4 cents in the second quarter, and by 10 cents in the first quarter.

Revenue has risen the past four quarters. Revenue increased 6.8% to $16 billion in the third quarter. The figure rose 8.3% in the second quarter from the year earlier and climbed 3.5% in the first quarter from the year-ago quarter.

Net income has dropped 29.9% year over year on average across the last five quarters. Performance was hurt by an 88.8% decline in the most recent quarter from the year earlier quarter.

Looking Forward: Analysts have a more positive outlook about the company’s results for next quarter. The average estimate for first quarter of the next fiscal year is $1.32 per share, an increase from $1.31 sixty days ago. For the fiscal year, the average estimate has moved down from $4.97 a share to $4.96 over the last seven days.

Competitors to Watch: Merck & Co., Inc. (NYSE:MRK), Pfizer Inc. (NYSE:PFE), Abbott Laboratories (NYSE:ABT), Eli Lilly & Co. (NYSE:LLY), GlaxoSmithKline plc (NYSE:GSK), Novartis AG (NYSE:NVS), Medtronic, Inc. (NYSE:MDT), Boston Scientific Corp. (NYSE:BSX), and Amgen, Inc. (NASDAQ:AMGN).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com