Dividend growth gem Johnson & Johnson (click ticker for report: ) posted strong results Tuesday morning. Revenue grew 6.5% (10.8% ex-currency) year-over-year to $17.1 billion, slightly better than consensus estimates. Earnings, net of a non-cash charge of $553 million, increased 0.8% year-over-year to $1.25 per share, a few cents better than consensus expectations. We like the company, and we hold shares in our Dividend Growth Newsletter portfolio.
Domestic growth outpaced the rest of the world, with sales surging 13.4% year-over-year to $7.8 billion. The acquisition of Synthes materially boosted medical device sales, which grew 18.3% domestically and 14.4% internationally (excluding currency). Pharmaceutical sales growth was also strong, with the segment expanding 7% (11.3% excluding currency) year-over-year to $6.4 billion, driven by strong performance from Remicade, Prezista, and Velcade, as well as several other recently-launched products. The firm also had two drugs approved—one in the US and one in the European Union—that could help boost sales going forward.
The consumer business was somewhat weak, echoing what we’ve seen from other global consumer products companies like Procter & Gamble (click ticker for report: ). Total consumer sales fell 4.3% to $3.6 billion, though sales grew 1% after excluding the impact of currency. The US business was fairly weak, with sales declining 0.4%, while international sales fell 6.1% (up 1.8% excluding currency). This segment has become less important to the firm’s overall revenue and profitability mix, which has moved more in the direction of pharmaceuticals and medical devices. We are unfazed by the slight weakness.
More importantly, SG&A expenses remained flat year-over-year on an absolute basis, but fell 210 basis points, to 30.6% of sales. We like to see the company leverage fixed costs and avoid wasteful spending, which Johnson & Johnson has done exceptionally well as of late. Going forward, the company raised its full-year adjusted earnings forecast to $5.05-$5.10 per share, above its previous guidance of $5.00-$5.07 per share and roughly in-line with the consensus estimate of $5.06 (the midpoint was better, however). We expect the Synthes acquisition to be accretive to earnings in 2013, and we believe the company will continue to generate copious amounts of cash flow going forward.