Johnson & Johnson earnings: More of the same from this blue chip

Notable among Johnson & Johnson's consumer product lines were oral care and wound care, both of which have grown at a double-digit pace internationally this year. On the pharmaceutical side, Remicade, the company's athritis drug, has also shown double-digit growth. BloggingStocks recently profiled the patent lawsuit involving the drug, which resulted in Johnson & Johnson getting a $1.67 billion verdict.

The entire healthcare sector has been under pressure of late because of concerns that a reform -- which could seriously hurt companies' profits -- is imminent; President Barack Obama has stated that he wants immediate action on the front, though the details remain unclear. With 40% of revenues this year from U.S.-based pharmaceuticals and medical devices, Johnson & Johnson is certainly exposed should the government decide pharmaceutical and medical devices companies have been too profitable for too long.

At the same time, Johnson & Johnson does not carry the risk that a pure play in healthcare does, because their consumer business is excellent and they are broadly diversified across geography as well. They have enormous free cash flows and are able to acquire and invest as needed, and are tough to beat in terms of competitive positioning for a large cap company. Stocks like this only get so cheap, and at about 13x earnings, JNJ is trading for far below it's historical earnings and sales multiples. In quieter times, I see the stock as being reasonably priced around $70/share -- not huge upside, but a stable company with a 4% dividend that's a comfortable addition to a portfolio.

For more: see Johnson & Johnson Reports 2009 Second Quarter Results

James Cullen also edits and writes at CollegeAnalysts.com. He is the Vice-President of the Boston College Investment Club, which owns JNJ, but has no personal position in the stocks mentioned above.