Johnson & Johnson reported better-than-expected fourth-quarter earnings on Tuesday, due in part to a favorable tax rate, and said it is considering selling a $2 billion-a-year diagnostics business.

The diversified healthcare company said it may sell its Ortho Clinical Diagnostics business, which makes everything from tests to determine blood type to laboratory equipment, or turn it into a stand-alone company.

The strategy comes as drugmakers are shedding businesses and cutting costs due to overseas price controls and pressure on payments from insurers and the government. Pfizer, for instance, is spinning off its animal health products business, and Abbott Laboratories has split off its drugs unit.

Debbie Wang, an analyst with Morningstar, said the J&J diagnostics unit "is a slower grower, and if you're not one of the leaders, it's very difficult to compete in that area."

J&J said it earned $1.19 per share, excluding one-time items, in the fourth quarter, beating analysts' average estimate of $1.17.

A favorable tax rate and cost controls boosted results, according to Piper Jaffray analyst Matt Miksic. He also cited very strong growth in sales of J&J's traditional artificial hips and of artificial knees, whose combined U.S. sales rose 7% despite disruptions from Superstorm Sandy in the quarter.

Charges for hip implants

Including a charge of $800 million, related mostly to recalls of defective "metal-on-metal" hip replacement devices made by its DePuy Orthopedics unit, J&J earned $2.6 billion, or 91 cents per share. That compared with $218 million, or 8 cents per share, a year earlier, when the company took charges of more than $3 billion, including $800 million for medical costs related to the same recalls.

All-metal hip implants were developed to be more durable than traditional implants but have failed at a high rate. In some cases, they have shed metal fragments that have disabled patients. Traditional implants combine a ceramic or metal ball with a plastic socket.

As many as 500,000 Americans are estimated to have received metal-on-metal hip replacements in the last five years, with J&J the largest manufacturer of such products.

The company withdrew its ASR metal-on-metal hip system in 2010 and faces more than 2,000 lawsuits from patients claiming to have been harmed by it.

Revenue up but misses

J&J said global revenue rose 8% to $17.56 billion in the fourth quarter, below Wall Street expectations of $17.7 billion.

"The sales miss was driven by lower-than-expected medical device and consumer sales," RBC Capital Markets analyst Glenn Novarro said in a research note.

Navarro said selling the $2.1 billion Ortho diagnostics business made sense. The unit's products include equipment for laboratory diagnostics and blood transfusion screening. J&J's diagnostics sales fell 4% in the fourth quarter to $530 million.

Sales of prescription drugs jumped 7% to $6.52 billion, helped by strong sales of its treatments for arthritis, psoriasis and HIV.

"By any measure, we have transformed our pharmaceuticals business," Chief Executive Alex Gorsky told analysts on a conference call. The business is bouncing back after several years of anemic sales due to generic competition for some of its top medicines.

But J&J said it expects its blockbuster Concerta treatment for attention deficit disorder to face pressure from cheaper generics early this year.

Fourth-quarter sales of medical devices rose almost 14% to $7.38 billion, boosted by the company's recent acquisition of trauma-device maker Synthes.

Sales of J&J's array of consumer products fell almost 3% to $14.4 billion, hurt by the stronger dollar and recalls of Tylenol and other over-the-counter medicines that have curtailed availability of the brands.

The company forecast full-year 2013 earnings of $5.35 to $5.45 per share, excluding special items. Analysts, on average, expected $5.49, according to Thomson Reuters I/B/E/S. The company is known for making conservative forecasts at the beginning of the year.