Product recalls hammer Johnson & Johnson's 4th-qtr 2010 results

US health care giant Johnson & Johnson (NYSE: JNJ) disappointed investors yesterday, posting fourth-quarter and full-year 2010 financial results that were below consensus forecasts and were badly impacted by product recalls and suspension of a manufacturing facility in its consumer products businesses, where global sales for the year fell 7.7% to $14.6 billion and domestic turnover slumped 19.3%. By around 9.30 am, J&J’s shares had fallen 2.3% to $60.82, having earlier dropped as low as $60.75, but closed the day’s trading at $61.08, down 1.8% in a flat market.

The company reported group sales of $15.6 billion for the fourth quarter of 2010, a drop of 5.5% compared to the like 2009 quarter. Operational sales declined 5.1% and the negative impact of currency was 0.4%. Domestic sales fell 8.1%, while international turnover was down 3.1%, reflecting an operational decline of 2.3% and a negative currency impact of 0.8%. Worldwide sales for the full-year 2010 were $61.6 billion, a dip of 0.5% versus 2009. Domestic revenue dropped 4.7%, while international sales increased 3.6%, reflecting operational growth of 1.9% and a positive currency impact of 1.7%.

Net earnings and diluted earnings per share for the quarter were $1.9 billion and $0.70, respectively. Fourth-quarter 2010 net earnings included after-tax charges of $922 million representing the net impact of litigation settlements, product liability expense and costs associated with the DePuy ASR Hip recall. Fourth-quarter 2009 net earnings included an after-tax restructuring charge of $852 million and an after-tax gain of $212 million representing the net impact of litigation settlements. Excluding these special items, net earnings for the current quarter were $2.9 billion and diluted EPS was $1.03, representing increases of 0.6% and 1.0%, respectively, compared to the like 2009 period.