St. Jude Medical 's ( STJ ) first-quarter
adjusted earnings per share of 92 cents were in line with the Zacks
Consensus Estimate and transcended the year-ago earnings of 86
cents. Adjusted earnings exclude one-time items such as
restructuring and acquisition-related charges as well as income tax
benefits. Adjusted earnings are within the company's first-quarter
guidance of 91-93 cents a share.EXACTECH INC (EXAC): Free Stock Analysis ReportNUVASIVE INC (NUVA): Free Stock Analysis ReportPERRIGO COMPANY (PRGO): Free Stock Analysis
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Profit (as reported) for the quarter increased 5.2% year over year
to $223 million (or 78 cents a share). Controlled operating
expenses managed to dampen sluggish sales and a difficult Med-Tech
environment in the quarter.
The Minnesota-based medical technology giant noted that it is
comfortably placed with its earnings results and plans to launch 20
new products in 2013 to salvage its declining top line.
Revenues dropped 4% (down 3% in constant currency) year over year
to $1,338 million in the first quarter. Results were below the
Zacks Consensus Estimate of $1,368 million. Unfavorable foreign
currency lowered total revenue by $17 million. All segments, except
the Atrial Fibrillation (AF) business, reported disappointing
results, especially the Cardiac Rhythm Management (CRM) unit.
Revenues from the CRM division, St. Jude's mainstay, fell 8% (down
7% in constant currency) year over year to $678 million, indicating
sustained softness in the CRM market. ICD revenues slid 5% (down 4%
in constant currency) to $427 million and pacemaker sales plunged
12% (down 11% in constant currency) to $251 million.
On a positive note, Atrial Fibrillation revenues climbed 5% (up 7%
in constant currency) year over year to $233 million.
Neuromodulation sales also dropped 4% (down 4% in constant
currency) to $99 million.
Revenues from the Cardiovascular franchise declined 2% year over
year (flat in constant currency) at $328 million. Within
Cardiovascular, vascular products sales dipped 3% to $175 million
and structural heart product revenues fell 1% to $153
Gross margin decreased to 71.8% from 72.7% a year ago. Selling,
general and administrative expenses, as a percentage of sales,
remained roughly flat at 35%.
Research and development expenses (as a percentage of sales) edged
down to 12% from 12.5%. However, it is worthwhile to note that
operating margins increased to 23% from 21.6% a year ago, on the
back of controlled expenses.
St. Jude exited the first quarter of 2013 with cash and cash
equivalents of $966 million, a year-over-year decrease of 19.1%.
Long-term debt increased 11.1% year over year to $2,833
St. Jude has provided its earnings forecast for the second quarter
as well as reiterated its guidance for 2013. The company expects
adjusted earnings for the year in the band of $3.68-$3.73. For the
second quarter, it envisions adjusted earnings in the range of
93-95 cents a share. The current Zacks Consensus Estimates for the
second quarter and 2013 are 94 cents and $3.70, respectively.
We are concerned regarding St. Jude's declining top-line growth,
although the company's plan to introduce new products into the
market appears encouraging. A still choppy U.S. defibrillator
market remains an overhang on St. Jude, as reflected by sustained
implant volume pressure. A number of factors, including the Food
and Drug Administration (FDA) warning letter, have hindered ICD
We are also cognizant about the ongoing stiff global austerity
measures and difficult healthcare environment. However, the only
factor, which helped the company achieve its bottom-line target,
was an improved operating margin on the back of the company's
restructuring efforts to streamline the underlying business.
St. Jude currently carries a Zacks Rank #4 (Sell). While we remain
on the sidelines regarding STJ, medical products companies such as
NuVasive ( NUVA ),
Exactech ( EXAC ) and
Perrigo ( PRGO ) are expected to
do well. While NuVasive carries a Zacks Rank #1 (Strong Buy), the
other two are Zacks Rank #2 (Buy) stocks.