We reiterate our Neutral recommendation on
St. Jude Medical
). St. Jude reported first quarter fiscal 2012 adjusted earnings
per share of 86 cents beating the Zacks Consensus Estimate of 83
cents per share and surpassing the year-ago earnings of 80 cents
Adjusted earnings exclude extraordinary and one-time charges
such as restructuring expenses to modernize manufacturing in the
Cardiac Rhythm Management ("CRM") segment. In the reported quarter,
profit dropped 9% to $212 million (or 67 cents a share).
St. Jude reported net revenues of $1,395 million, up 1% year
over year, beating the Zacks Consensus Estimate of $1,383 million.
Net sales rose 2% on a constant currency basis. Healthy growth
across the company's smaller Atrial Fibrillation ("AF") and
Neuromodulation segments was largely offset by the decline in the
core CRM division and the Cardiovascular segment.
Based on a positive start to 2012, the company raised its
earnings forecast. We expect global demographic trends, aging
population and the rapid urbanization of developing countries to
drive long-term growth of this stock.
St. Jude is consistently recording 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.
While a host of new growth drivers (including new products and
emerging markets) is expected to boost results in 2012 and beyond,
we remain cautious about increased competition, a still soft CRM
market and the dilutive impact of acquisitions.
A still choppy CRM space overhangs on St. Jude and its peers
). Our long-term Neutral recommendation on St. Jude is in agreement
with a short-term Zacks #3 Rank (Hold).
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