Johnson & Johnson reported better-than-expected quarterly sales and earnings, helped by sharply lower taxes and a return to growth for its array of medicines, medical devices and consumer products.

But the diversified healthcare company, which is traditionally conservative in its outlook, predicted 2010 earnings would rise about 5 to 7 percent -- barely reaching Wall Street projections. Its shares were down 0.8 percent on Tuesday afternoon after falling as much as 1.6 percent earlier in the day.

Morgan Stanley analyst David Lewis called the 2010 forecast somewhat disappointing.

J&J must aggressively reinvest in the business to drive revenue growth, offset the impact of recent acquisitions and contend with economic and broader healthcare pricing pressures, Lewis said in a research note.

The company said fourth-quarter profit fell to $2.2 billion, or 79 cents per share, compared with $2.71 billion, or 97 cents per share, in the year-ago period.

Excluding special items, including an $852 million restructuring charge, J&J earned $1.02 per share. Analysts on average had expected 97 cents per share, according to Thomson Reuters I/B/E/S.

Company sales rose 9 percent to $16.55 billion, well above analyst predictions of $15.7 billion, helped by a recovering economy and newer products. By contrast, third-quarter sales fell 5.3 percent, hurt by generic competition for the company's Risperdal schizophrenia drug.

Sales beat our expectations across all three divisions, Leerink Swann analyst Rick Wise said, with fourth-quarter growth more than double his projections.

Company Chief Executive William Weldon said 2009 was the first year in 76 years that J&J failed to report sales growth. But the company predicted a return to sales growth this year.

We already are seeing promising signs we are driving significant growth and capitalizing on the investments we've made, Weldon told analysts in a conference call.

Another diversified health company, Swiss-based Novartis AG , reported a 54 percent rise in fourth-quarter net profit, helped by sales of H1N1 swine flu vaccines. It also named drugs head Joe Jimenez as CEO, replacing longtime chief Daniel Vasella.

J&J's fourth-quarter pharmaceutical division sales rose 5.4 percent to $5.99 billion, medical device and diagnostic unit sales increased 11.8 percent to $6.31 billion and consumer product sales rose 10.2 percent to $4.25 billion.

The earnings beat in the quarter was due in part to an extra week of sales in the calendar year, as well as sharply lower taxes, the company said. The tax rate in the quarter, of 15.3 percent, was well below the 22.8 percent rate in the year-ago period.

J&J predicted a full-year 2010 profit of $4.85 to $4.95 per share excluding items. Analysts have expected $4.94 per share.

J&J's profit jumped almost 10 percent in 2008, but grew only 1.8 percent last year as the recession crimped sales of many products and generic competition took its toll.

The company expects earnings to rise as much as 7 percent this year -- helped by novel products such as its recently approved Stelara psoriasis drug.

J&J shares were down 0.8 percent at $62.71 on the New York Stock Exchange, off an earlier low at $62.22.

(Reporting by Ransdell Pierson and Lewis Krauskopf, editing by Gerald E. McCormick, Dave Zimmerman and Matthew Lewis)

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