A small bit of evidence against a broad-based slowdown came yesterday with Johnson & Johnson’s (JNJ) earnings. For the first quarter, the company earned $1.26 a share, which beat the Street’s estimates by six cents a share.

The company said it expects 2008 EPS of $4.40 to $4.45. That’s a penny a share higher on both the high and low ends. I’m not sure if that qualifies as “guiding higher,” but there you are.

Bear in mind that JNJ isn’t 100% health care. The company also has many consumer products (like Listerine). Drug sales only increased by 3.3%, and it you don’t count currency gains, they actually fell a bit. MarketWatch reports:

J&J said that lower sales of the company's anemia drug Procrit contributed to the slump. Sales of Procrit have been under pressure in recent quarters due to the imposition of tightened prescribing restrictions by the Food and Drug Administration and tougher reimbursement standards by Medicare. Amgen Inc. (AMGN) markets a similar product under the name Epogen.

J&J said worldwide Procrit sales fell 27% operationally to $629 million for the quarter. The sharpest decline was seen in the U.S., where Procrit sales tumbled 37% operationally to $334 million.

J&J's top-selling drug, Risperdal, also saw signs of sales erosion, due largely to the advent of generic competition. Worldwide sales of the antipsychotic slid 9% operationally to $809 million. This was offset to some degree by sales of a newer formulation of the drug, Risperdal Consta, which grew 10% operationally to $309 million.

So is JNJ a good buy. Two years ago, I said the stock was cheap. At the time, JNJ was going for $57, and nowadays it's over $65. For an investor with a long-term horizon, I’d say JNJ is a still a good buy. However, it would be a better buy under $60. This is still a nervous market (over $3.5 trillion in cash) and I think JNJ could get hit in the next few months.

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Eddy Elfenbein

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