St. Jude Medical Beats on Q2 Earnings, Upgrades Outlook

St. Jude Medical Inc. (STJ) posted a 6.25% rise in adjusted net earnings per share to $1.02 for the second quarter of 2014 from 96 cents in the year-ago quarter. With this, the St. Paul, MN-based medical device maker’s earnings per share beat the Zacks Consensus Estimate by a couple of cents and outdid the company’s own guidance of 99 cents to $1.01 for the quarter.

Net adjusted earnings rose 7.3% to $295 million from $275 million in the 2013-second quarter. Reported earnings were $270 million or 93 cents per share in the quarter, compared with $115 million or 40 cents per share in the comparable quarter of 2013.

Revenues

Revenues grew about 3.2% (both in reported and constant-currency) to $1,448 million for the quarter, which surpassed the Zacks Consensus Estimate of $1,436 million but lied within the company’s own guided range of $1,380 to $1,460 million. Favorable foreign currency translation boosted revenues by roughly $4 million in the second quarter.

Revenues from the international market rose 6.1% to $779 million, accounting for 53.8% of total revenues. However, revenues from the U.S. were flat at $669 million compared with the year ago level, accounting for 46.2% of total revenues.

Product Division Results

In the Cardiac Rhythm Management (CRM) division, revenues went up roughly 2.0% (both in reported and constant-currency) to $733 million. U.S. revenues upped 0.5% to $382 million while international revenues zoomed 3.8% to $351 million in the quarter.

In the CRM division, implantable cardiac defibrillator (:ICD) revenues escalated 1.8% (1% in constant-currency) to $462 million. Meanwhile, pacemaker revenues scaled up 2.65% to $271 million compared with the prior year quarter. At constant-currency, pacemaker revenues rose by 3% in the quarter.

In the Atrial Fibrillation (AF) division, revenues scaled up 8.4% to $257 million, while at constant currency it increased 8% over the second quarter of 2013. International revenues grew 9.7% to $159 million while U.S. revenues rose 6.5% to $98 million in the quarter.

In the Cardiovascular division, revenues went up 3.2% to $351 million in the quarter and roughly 3% at constant-currency. Revenues from the international market rose 4.5% to $233 million and from the U.S. market inched up 0.9% to $118 million.

In the cardiovascular division, vascular product revenues edged up roughly 1.0% to $180 million. Meanwhile, structural heart product revenues increased 6.0% to $171 million for the quarter.

In the Neuromodulation division, revenues went down nearly 1.0% to $107 million in the second quarter, both on reported and constant-currency bases. Revenues from the U.S. ebbed 11.0% to $71 million but revenues from the international market improved 29% to $36 million in the 2014-second quarter.

Financial Position

St. Jude Medical had cash and cash equivalents of $1,580 million as of Jun 28, 2014, up 15.1% from $1,373 million as of Dec 28, 2013. Total debt rose 17.5% to $4,206 million as of Jun 28, 2014 compared with $3,580 million as of Dec 28, 2013. Consequently, debt-to-capitalization increased 620 basis points to 51.0% from 44.8% as of Dec 28, 2013.

Guidance

For the third quarter of 2014, St. Jude Medical expects revenues in the range of $1,315 to $1,395 million while the company anticipates adjusted net earnings per share to lie between 95 and 97 cents for the quarter. The current Zacks Consensus Estimates for earnings per share and revenues for the quarter are pegged at 96 cents and $1,396 million.

For full year 2014, St. Jude Medical upgraded its revenues guidance to the range of $5,640 to $5,760 million from the prior outlook of $5,610 to $5,760 million. The company has also upgraded its adjusted earnings per share guidance to $3.96 to $4.01 from the prior range of $3.95–$4.00. The current Zacks Consensus Estimates for earnings per share and revenues for the year are pegged at $3.98 and $5,701 million.

Our Take

We are impressed with St. Jude Medical’s second quarter results, which topped estimates on both earnings and revenues fronts. Moreover, the company’s upgraded earnings and revenues guidance is encouraging.

We are optimistic about the company’s recent acquisition of privately-held CardioMEMS, Inc. at the beginning of last month. With the closure of the CardioMEMS acquisition, St. Jude Medical expects accelerated growth in its cardiovascular segment. Currently, St. Jude carries a Zacks Rank #2 (Buy).

Other stocks in the medical products industry that are also worth considering include Hospira Inc. (HSP), OraSure Technologies, Inc. (OSUR), and Wright Medical Group Inc. (WMGI). All of them sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on STJ
Read the Full Research Report on HSP
Read the Full Research Report on WMGI
Read the Full Research Report on OSUR


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