NEW YORK Johnson & Johnson (JNJ.N)reported disappointing quarterly revenue on Tuesday as sales of U.S. consumer products plunged 25 percent following recalls of Tylenol and other consumer brands.
Although J&J reported better-than-expected third-quarter earnings, analysts said the profit beat was largely due to lower taxes and one-time items, and its shares were down nearly 1 percent.
The company's string of recalls over the past year continued on Monday, when J&J recalled a lot of almost 128,000 bottles of Tylenol in the United States and Puerto Rico because of musty odors.
"There was more of a decline in the consumer business than we had expected and not as strong a showing in the medical device business" during the quarter, said Noble Financial Capital analyst Jan Wald.
The diversified healthcare company earned $3.42 billion, or $1.23 per share. That compared with $3.35 billion, or $1.20 per share, in the year-earlier quarter.
Analysts on average expected $1.15 per share, according to Thomson Reuters I/B/E/S.
Global company revenue fell 0.7 percent to $14.98 billion, shy of Wall Street forecasts of $15.19 billion.
"Lower consumer sales are weighing dramatically on Johnson & Johnson," said Morningstar analyst Damien Conover.
Most of the recalled consumer medicines were made at a factory in Fort Washington, Pennsylvania, which was shut down in April by J&J's McNeil Consumer Healthcare unit in order to correct quality control lapses discovered there by U.S. regulators.
The U.S. Food and Drug Administration cited thick dust, grime and contaminated ingredients at the facility. J&J said on Tuesday it does not plan to reopen the plant until late next year. Meanwhile, it is using other McNeil plants to help offset lost production of the recalled products.
Conover said a favorable tax rate of 19 percent in the quarter, well below his forecast of 24 percent, shored up J&J results. He also cited stronger than expected contributions from "other income," meaning nonrecurring items.
J&J raised its full-year profit forecast to between $4.70 and $4.80 per share, from its prior view of $4.65 to $4.75 per share, citing the weaker dollar -- which raises the value of sales in overseas markets.
Global sales of consumer products fell 10.6 percent to $3.57 billion. Sales of the consumer brands plunged 25 percent in the United States, where almost 200 million bottles of Tylenol and other consumer medicines have been recalled in the past year due to quality control lapses -- including moldy odors in the products and overly high dosages of active ingredients.
No injuries from recalled products have been reported but many consumers are turning to cheaper, store-brand alternatives.
The company is facing a U.S. congressional probe of the repeated recalls of Tylenol, painkiller Motrin and allergy treatment Benadryl -- including alleged "phantom" recalls which J&J failed to disclose to the public.
Sales of J&J's array of medical devices and diagnostics edged up 1.3 percent to $5.92 billion. Worldwide sales of prescription drugs rose 4.7 percent to $5.5 billion, a bright spot in the quarterly earnings report.
Company shares were down 0.7 percent at $63.43 in midday trading on the New York Stock Exchange, amid a 1.5 percent decline for the ARCA Pharmaceutical Index .DRG of large U.S. and European drugmakers.