Johnson & Johnson tops 2Q forecasts despite profit drop

Johnson & Johnson's second-quarter profit fell 11.5 percent, mainly due to a sizeable gain a year ago, but it easily beat Wall Street's expectations. The company also raised its full-year financial forecasts'

Its shares climbed in premarket trading Tuesday.

Sales of the health care giant's newest prescription drugs buoyed revenue and the effects of unfavorable exchange rates, which have been hurting U.S. companies, eased a bit.

The world's biggest maker of health care products reported net income of $4 billion, or $1.43 per share. That was down from $4.62 billion, or $1.63 per share, in 2015's second quarter, when the company had a gain of $931 million, mainly from the sale of pain drug Nucynta. In the latest quarter, it took a $557 million charge for litigation costs.

Earnings, adjusted for non-recurring costs and amortization costs, came to $1.74 per share. That topped the $1.67 per share that analysts expected.

The New Brunswick, New Jersey-based company posted revenue of $18.48 billion in the period, beating Street forecasts for $17.89 billion.

Credit Suisse analyst Vamil K. Divan, in a note to investors, said the "strong quarter" was driven by better-than-expected revenue in the prescription drug business, "with almost all of the key growth drivers delivering," and in the medical devices business, which has been slumping.

The company said the strong dollar, which reduces the value of products bought overseas in local currencies, reduced sales by 2.7 percent. Such unfavorable exchange rates have been hurting U.S.-based multinational companies for the last few years, but by much more until recently.

Johnson & Johnson raised its full-year earnings forecast to a range of $6.63 to $6.73 per share, up from its April forecast for $6.53 to $6.68 per share. It now expects revenue in the range of $71.5 billion to $72.2 billion, up from $71.2 billion to $71.9 billion.

"We continue to see good momentum through the first half of 2016," CEO Alex Gorsky said in a statement. "We saw notable strength in our pharmaceuticals business due to the continued success of new products."

Sales of prescription drugs, J&J's largest and healthiest business, climbed 8.9 percent to $8.65 billion in the quarter, mostly due to a 13.2 percent jump in U.S. sales. Those increases were mainly driven by surging sales of newer medicines, including Imbruvica for blood cancer, type 2 diabetes pill Invokana, Darzalex for the bone marrow cancer multiple myeloma and heavily advertised Xarelto, for preventing heart attacks and strokes.

Combo diabetes pill Invokamet won U.S. approval during the quarter and three medicines were approved for sale in the European Union.

Sales of medical devices and diagnostics dipped nearly a percent to $6.41 billion, partly due to last year's sale of the Cordis heart devices unit. J&J began a reorganization to boost profitability of the entire division earlier this year and, during the second quarter, bought privately held orthopedic implants maker BioMedical Enterprises Inc.

Sales of consumer health products dipped 1.8 percent to $3.42 billion, despite strong sales from pain relievers Tylenol and Motrin and skin care lines Aveeno and Neutrogena. On Monday, J&J closed a $3.3 billion acquisition of hair and personal products maker Vogue International LLC, and during the second quarter, it bought "dermocosmetics" maker NeoStrata Co. Inc. and a Brazilian brand of diaper rash cream.

In trading before the markets opened, shares of the Dow component jumped $2.61, or 2.1 percent, to $125.75—above their 52-week high of $124.30.

Johnson & Johnson shares have increased 20 percent since the beginning of the year, while the Standard & Poor's 500 index has increased 6 percent.

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