Medical devices major
St. Jude Medical
) fourth-quarter 2011 adjusted earnings per share of 86 cents beat
the Zacks Consensus Estimate by a couple of cents and exceeded the
year-ago earnings of 75 cents.
Highlights from the Quarter
Profit (as reported) for the fourth quarter slipped roughly 21%
year over year to $163.4 million (or 51 cents a share) as higher
sales were overshadowed by lofty special charges.
Revenues rose 4% year over year to $1,406.9 million, beating the
Zacks Consensus Estimate of $1,400 million. Double-digit growth
across the company's Atrial Fibrillation, Cardiovascular and
Neuromodulation segments was partly masked by the decline in the
core Cardiac Rhythm Management ("CRM") division.
Revenues from the CRM division fell 4% year over year,
indicating sustained softness in the U.S. ICD market. ICD revenues
clipped 5% and pacemaker sales declined 4% in the quarter.
Atrial Fibrillation and Neuromodulation businesses posted
healthy growth in quarter with revenues surging 13% and 12% year
over year, respectively. Revenues from the cardiovascular franchise
climbed 18%, backed by the contributions of AGA Medical.
We have discussed the quarterly results at length here:
St. Jude Beats, Charges Hurt Net.
Agreement - Estimate Revisions
Estimates for St. Jude are on downswing following the fourth
quarter results. Out of 22 analysts covering the stock, 2 have
lowered their estimates for fiscal 2012 over the past week with
none raising their forecasts. Over the past month, 18 analysts have
truncated their forecasts for the year with 3 moving in the
Estimates for the first quarter elicit somewhat similar trend
with 4 (out of 18 analysts) having chopped their estimates over the
past 7 days with no reverse movements. There were 11 downward
revisions over the past month coupled with a solitary opposite
movement. The bearish sentiment reflects the impact of an
unfavorable foreign exchange environment on earnings in 2012.
Magnitude - Consensus Estimate Trend
There has been an increase of a penny in the estimate for fiscal
2012 over the past week. However, given a plethora of downward
revisions, estimate for the year have fallen by a 7 cents over the
past month. For the first quarter, estimate (of 83 cents) remained
stationary over the last 7 days while declining by 2 cents over the
past 30 days.
Neutral on St. Jude
St. Jude is consistently producing revenue growth and positive
earnings surprises over the past several quarters. We are impressed
by its solid fundamentals, healthy growth trajectory, strong
product mix, robust pipeline and cost management initiatives. A
spate of new growth drivers (including new products and emerging
markets) are expected to offer opportunities for accelerated sales
growth in 2012 and beyond.
St. Jude is poised for incremental opportunities in CRM on the
back of strong product momentum, despite soft market conditions.
The company's Fortify and Unify devices are gaining notable
traction and increased penetration of these products should enable
it to expand its position in CRM.
St. Jude achieved a major milestone during the fourth quarter as
it secured the U.S. approval for its much-awaited Unify Quadra
cardiac resynchronization therapy defibrillator ("CRT-D"), the
industry's first quadripolar pacing system. St. Jude is currently
the only company to offer this technology globally.
Unify Quadra, which is also approved in Europe, is expected to
help the company win ground in the highly competitive U.S.
defibrillator space in 2012. St. Jude is also expected to benefit
from favorable replacement cycle and a new distributor in
Moreover, the company's strategic investment in cardiac devices
maker CardioMEMS represents another significant opportunity to
boost its technologies focused on improving heart failure
In Atrial Fibrillation, new irrigated ablation catheters for
treating cardiac arrhythmias should help St. Jude sustain the
healthy growth in 2012. Growth in St. Jude's Neuromodulation
business will be fostered by the expanded adoption of deep brain
stimulation ("DBS") systems.
Moreover, U.S. approval of the DBS system in Parkinson's disease
(expected in 2013) represents another promising prospect. St.
Jude's DBS business is poised for a robust growth in 2012, in part,
driven by the impressive results from the first controlled study of
its DBS systems (Libra and LibraXP) for Parkinson's disease, which
was recently published in The Lancet Neurology journal.
On the Cardiovascular front, emerging opportunities across a
slew of fast-growing therapy areas such as transcatheter aortic
valve implant ("TAVI"), percutaneous mitral valve repair ("PMVR"),
left atrial appendage ("LAA") and renal denervation should set the
stage for growth in the years ahead.
Among the emerging opportunities, St. Jude is optimistic to
enter the European TAVI market with its Portico valve before
end-2012. Moreover, the company is expected to launch the PMVR
technology in Europe before end-2013 and its renal denervation
catheter by end-2012.
However, St. Jude and its peers
) are contending in a soft CRM market. According to the company,
the worldwide CRM market contracted 4% in constant currency in
2011, thereby impacting its CRM sales. The company expects the
global CRM market to decline at a low single-digit bracket (in
constant currency) in 2012.
Moreover, pressure on the company's ICD business has been
exacerbated by the Riata defibrillator lead (a thin wire) issue.
The FDA issued, in late 2011, an urgent recall of these leads given
the potential risk of serious injury or patient death.
We are also cautious about the dilutive impact of acquisitions
and foreign exchange headwinds. We currently have a long-term
Neutral recommendation on St. Jude. The stock currently retains a
short-term Zacks #4 Rank (Sell).
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years
ago that earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking discovery
into two of the most celebrating stock rating systems in use
today. The Zacks Rank for stock trading in a 1 to 3 month time
horizon and the Zacks Recommendation for long-term investing (6+
months). These "Earnings Estimate Scorecard" articles help
analyze the important aspects of estimate revisions for each
stock after their quarterly earnings announcements. Learn more
about earnings estimates and our proven stock ratings at
BOSTON SCIENTIF (
): Free Stock Analysis Report
): Free Stock Analysis Report
ST JUDE MEDICAL (
): Free Stock Analysis Report
To read this article on Zacks.com click here.