By Ransdell Pierson

Company Chief Executive William Weldon, in a meeting with analysts, said consumers are becoming more frugal due to economic hardships and cited expectations that unemployment would continue to rise and hurt global healthcare sales.

"I remain optimistic about our ability to adjust to evolving economic conditions," he said, even though patients are cutting back on medical treatments, including elective surgical procedures.

The diversified healthcare company reported fourth-quarter earnings of $2.71 billion, or 97 cents per share, compared with $2.37 billion, or 82 cents per share, a year earlier.

"Fourth quarter sales missed across all divisions, both international and domestic," Leerink Swann analyst Rick Wise said in a research report.

Another drugmaker, Forest Laboratories Inc , posted a 38 percent decline in quarterly profit Tuesday on charges for licensing new medicines, but shares rose because operating results far exceeded analyst targets thanks to lower-than-expected spending.

Excluding special items, J&J earned 94 cents per share. Analysts polled by Reuters Estimates, on average, expected 92 cents per share.

J&J expects full-year 2009 earnings of $4.45 to $4.55, excluding items but including expected dilution of 3 cents to 5 cents per share from J&J's purchase of medical device company Mentor Corp.

On that basis, analysts polled by Reuters Estimates, on average, were expecting $4.58 per share.

Global quarterly sales fell 4.9 percent to $15.2 billion, well below the Reuters Estimates forecast of $15.9 billion. Sales would have fallen only 1 percent if not for the strengthening dollar, which lowers overseas sales when converted back into U.S. currency.

Even as the stronger dollar hurt overseas sales, Leerink's Wise said a number of important brands continue to lose U.S. market share, including arthritis drug Remicade, epilepsy treatment Topamax and J&J's Ethicon surgical products.

Global sales of prescription drugs fell 11 percent to $5.69 billion, as two thirds of revenue from J&J's Risperdal schizophrenia drug vanished due to new generic competition for the product.

Moreover, sales of Remicade -- usually a fast-growing product -- slipped 2.4 percent to $886 million. And sales of the company's anemia drugs fell 11 percent to $560 million, on continuing concerns about safety of such medicines. Topamax, an epilepsy drug which will face generic competition in March, rose 4.3 percent to $680 million.

Sales of company medical devices, which have bolstered results over the past year, declined 1.9 percent to $5.64 billion.

Consumer product sales edged up 1.2 percent in the quarter to $3.86 billion, providing a weaker lift than in recent quarters.

J&J shares were plat at $57.44 in midday trading on the New York Stock Exchange. Forest Laboratories rose 2.3 percent to $26.35, also on the NYSE.

(Additional reporting by Lewis Krauskopf and Toni Clarke; Editing by Derek Caney)