St. Jude Medical
) fourth-quarter adjusted earnings per share of 92 cents topped
the Zacks Consensus Estimate by 2 cents and transcended the
year-ago earnings of 86 cents.
The adjusted earnings exclude charges (of $75 million) related
to restructuring activities of its business segments and
centralization of certain support functions. Costs related to
impairment of intangibles and inventory write-off for suspension
of certain Cardiovascular and Ablation Technologies Division
(CATD) offerings were also excluded. Adjusted earnings also
excluded certain income tax-related expenses, and legal and other
charges associated with field actions in the Implantable
Electronic Systems Division (IESD). However, it includes an
income tax benefit of $6 million from the federal research and
development tax credit.
Profit (as reported) for the fourth quarter dropped 4% year
over year to $120 million (or 39 cents a share), as controlled
operating expenses were dampened by sluggish sales and a
difficult Med-Tech environment.
For 2012, adjusted earnings of $3.48 a share beat the Zacks
Consensus Estimate by 3 cents and exceeded the year-ago earnings
of $3.28 a share. Profit declined roughly 8% year over year to
$752 million or $2.39 a share.
The Minnesota-based medical technology giant noted that only
the Atrial Fibrillation business is growing at a healthy pace and
the implantable cardioverter defibrillator (ICD) has not lost
market share, despite the manufacturing issues of the
Revenues dropped 2% (down 1% in constant currency) year over
year to $1,372 million, just ahead of the Zacks Consensus
Estimate of $1,370 million. All segments reported disappointing
results, especially Cardiac Rhythm Management (CRM) and
Neuromodulation units, except the Atrial Fibrillation (AF)
For the full year, sales also declined 2% (up 1% in constant
currency) year over year to $5,503 million, modestly beating the
Zacks Consensus Estimate of $5,501 million. Foreign currency
fluctuations lowered revenues by roughly $23 million and $137
million in the fourth quarter and 2012, respectively.
Revenues from the CRM division, St. Jude's mainstay, fell 6%
(down 5% in constant currency) year over year to $682 million,
indicating sustained softness in the CRM market. ICD revenues
slid 3% (down 2% in constant currency) to $422 million and
pacemaker sales plunged 11% (down 9% in constant currency) to
A still choppy U.S. defibrillator market remains an overhang
on St. Jude and its peers
), as reflected by sustained implant volume pressure. ICD volume
growth has been hindered by a number of factors, including the
Food and Drug Administration (FDA) warning letter.
On a positive note, Atrial Fibrillation revenues climbed 10%
(up 11% in constant currency) year over year to $239 million.
However, Neuromodulation sales dropped 7% (down 6% in constant
currency) to $113 million.
Revenues from the Cardiovascular franchise remained flat at
$338 million. Within Cardiovascular, vascular products sales
dipped 2% to $186 million. Structural heart product revenues were
flat at $152 million.
Gross margin decreased to 69.5% from 71.4% a year ago.
Selling, general and administrative expenses, as a percentage of
sales, fell to 32.9% from 39.2% a year-ago.
Research and development expenses (as a percentage of sales)
edged down to 11.5% from 12.6%. However, it is worthwhile to note
that operating margins increased to 16.4% from 11.2% a year ago,
on the back of controlled expenses.
St. Jude exited the fourth quarter of 2012 with cash and cash
equivalents of $1,194 million, a year over year increase of
roughly 21.1%. Long-term debt decreased 6% year over year to
St. Jude has provided its earnings forecast for the first
quarter as well as 2013. The company expects adjusted earnings
for the year in the band of $3.68-$3.73 per share. For the first
quarter, it envisions adjusted earnings in the range of 91-93
cents a share. The current Zacks Consensus Estimates for the
first quarter and 2012 are 89 cents and $3.64, respectively.
St. Jude, with a market cap of $12.23 billion, is a leading
medical device manufacturer maintaining a solid rate of growth
over the past decade. We are impressed by the company's efforts
in leveraging its margins by undertaking various restructuring
initiatives and controlling expenses. However, competitive
pressures and a sluggish CRM market, given the ongoing difficult
macroeconomic conditions, continue to be a drag on the company's
St. Jude currently carries a Zacks Rank #3 (Hold). Medical
products companies such as
), which carries a Zacks Rank #1 (Strong Buy), is expected to do
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