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Can St. Jude Medical (STJ) Earnings Pull a Surprise in Q3?

St. Jude Medical Inc.STJ is set to report third-quarter fiscal 2015 results on Oct 21. Last quarter, the company reported earnings of $1.03 per share, which beat the Zacks Consensus Estimate by 4 cents. Notably, St. Jude has posted a positive earnings surprise of 1.8% on an average over the last four quarters.

Let's see how things are shaping up for this announcement.

Factors at Play

A strong U.S. dollar is expected to hurt St. Jude's third-quarter results. Management expects sales to be hurt by $105-$115 million on a year-over-year basis. Nonetheless, the constant currency sales growth in the third quarter of 2015 is expected to be between 5% and 7%. St. Jude forecasts earnings between 96 cents and 98 cents for the quarter.

Nevertheless, we believe that strong momentum at St. Jude's Neuromodulation and Atrial Fibrillation (AF) businesses and a string of regulatory approvals for its new products achieved over the last few months are key growth drivers. We also believe that the company's expanding and innovative product portfolio will drive significant growth in the quarter.

Earnings Whispers

Our proven model does not conclusively show that St. Jude is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: St. Jude has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $0.97.

Zacks Rank: St. Jude carries a Zacks Rank #2 which increases the predictive power of ESP; but when combined with a 0.00% ESP, it makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

NuVasive, Inc. NUVA with earnings ESP of +7.41% and a Zacks Rank #1.

Masimo Corp MASI with earnings ESP of +3.23% and a Zacks Rank #1.

Hologic Inc. HOLX with earnings ESP of +2.38% and a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HOLOGIC INC (HOLX): Free Stock Analysis Report

ST JUDE MEDICAL (STJ): Free Stock Analysis Report

MASIMO CORP (MASI): Free Stock Analysis Report

NUVASIVE INC (NUVA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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