Contact lenses

Through the purchase of Pfizer's (PFE, 26.88) healthcare products business, JNJ greatly expanded its consumer segment.

This quarter, sales grew 48.5% or 6.7% organically to $3.5 billion.

Again, international growth outpaced growth in the US, led by strong sales of its reformulated Tylenol OTC upper respiratory products, Listerine, Aveeno, Benadryl, and Rogaine product lines.

The Bottom Line JNJ's first quarter results are a testament to the broad-based nature of its product portfolio.

As such, we recommend investors continue to add to positions.

We remain confident in the company's overall strategy driving earnings leverage and top line growth, led by several new product launches and the new Consumer Health unit, in addition to the opportunity for share repurchases.

Management raised its FY07 cash EPS guidance from $3.93-$3.98 to $4.02-$4.07, which reflects the strong Q1 topline performance.

In addition, management noted it was comfortable with the consensus in the mid-point of this range.

The stock trades at 16.5x FY07 and 15.2x FY08 estimates.

This is a discount to all three of its comparative groups: the S&P 500 Pharma Index (22.4x), Health Care Equipment (46.2x), and the Household Products Index (21.9x).

-Kimberly DuB...

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