On Feb 13, we retained
St. Jude Medical Inc.
) at Neutral, following its fourth-quarter results. In spite of
the upbeat results, the medical devices giant provided a
conservative 2013 guidance.
Why the Retention?
On Jan 23, St. Jude posted fourth-quarter 2013 adjusted earnings
per share of 92 cents, which topped the Zacks Consensus Estimate
by 2 cents and transcended the year-ago earnings of 86 cents.
Revenues dropped 2% (down 1% in constant currency) year over year
to $1,372 million, just ahead of the Zacks Consensus Estimate of
The company's earnings have also managed to beat the Zacks
Consensus Estimates in the last four quarters with an average
surprise of 2.36%. Over the past 30 days, the Zacks Consensus
Estimates for 2013 and 2014 has moved up by 4 cents and 3 cents
to $3.70 and $3.97, respectively.
However, St. Jude's revenue guidance for 2013 looks dismal due to
an extremely challenging healthcare environment. Meanwhile, we
are impressed by the company's focus on cost savings,
restructuring and share repurchase programs to boost its bottom
line. Sales for 2013 are expected to be down 1%-2% year over
year, while adjusted earnings for the year are forecast to be up
A still soft Cardiac Rhythm Management (CRM) market along with
issues regarding the ICD leads has increased investor concerns.
However, multiple growth drivers and an efficient management team
should leverage long-term growth for the company.
Other Stocks to Consider
St. Jude has a Zacks Rank #3 (Hold). While we remain on the
sidelines regarding St. Jude, other large-cap medical products
companies worth a look are
Edwards Lifesciences Corp.
). All three are Zacks Rank #2 (Buy) stocks.
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