St. Jude Beats Earnings by a Penny - Analyst Blog

St. Jude Medical Inc. STJ posted a 4.3% rise in adjusted net earnings per share to 96 cents for the first quarter of 2014 from 92 cents a year-ago. With this, this St. Paul, MN-based medical device maker beat the Zacks Consensus Estimate by a penny and met its own guidance of 94 and 96 cents per share for the quarter.

Reported earnings were $249 million or 86 cents per share in the quarter, compared with $223 million or 78 cents per share in the comparable quarter of 2013.

Revenues

Revenues grew about 2.0% to $1,363 million for the quarter, exceeding the Zacks Consensus Estimate of $1,355 million as well as the company's own guided range of 1,280 to $1,360 million. Unfavorable foreign currency translation reduced revenues by roughly $25 million.

At constant currency, net revenues increased 4% over the prior-year quarter. Revenues from the U.S. inched up 0.6% to $644 million while international revenues increased 3.0% to $719 million.

Product Division Results

In the Cardiac Rhythm Management CRM division, revenues went up 1.3% to $687 million, while it increased 3% excluding the impact of foreign currency. U.S. revenues upped 1.4% to $367 million while international revenues zoomed only 1.3% to $320 million.

In the CRM division, implantable cardiac defibrillator (ICD) revenues escalated 2.1% (3% in constant-currency) to $436 million. Meanwhile, pacemaker revenues were flat at $251 million compared with the prior year quarter. At constant-currency, pacemaker revenues rose 2% in the quarter.

In the Atrial Fibrillation AF division, revenues scaled up 7.7% to $251 million, while at constant currency it increased 10% over the first quarter of 2013. U.S. revenues rose 5.5% to $96 million while international revenues grew 9.2% to $155 million.

In the Cardiovascular division, revenues slid 0.6% to $326 million in the quarter but rose 2% at constant-currency. Revenues from the U.S. inched up 0.9% to $114 million but revenues from the international market fell 1.4% to $212 million.

In the cardiovascular division, vascular product revenues edged up roughly 1% to $172 million at constant currency. Meanwhile, structural heart product revenues were almost flat at $154 million but rose 3% in constant currency, for the quarter.

In the Neuromodulation division, revenues were flat at $99 million in the first quarter, both on a reported and constant-currency basis. Revenues from the U.S. ebbed 9.5% to $67 million but revenues from the international market improved 28% to $32 million.

Financial Position

St. Jude Medical had cash and cash equivalents of $1,446 million as of Mar 29, 2014, up 5.3% from $1,373 million as of Dec 28, 2013. Total debt rose 9.2% to $3,910 million as of Mar 29, 2014 compared with $3,580 million as of Dec 28, 2013. Consequently, debt-to-capitalization increased 320 basis points to 48.0% from 44.8% as of Dec 28, 2013.

Guidance

For the second quarter of 2014, St. Jude Medical expects revenues in the range of $1,380 million to $1,460 million while the company anticipates adjusted net earnings per share to lie between 99 cents and $1.01 for the quarter. The current Zacks Consensus Estimates for earnings per share and revenues for the quarter are pegged at $1.00 and $1,441 million.

For full year 2014, St. Jude Medical upgraded its revenues guidance to the range of $5,610 to $5,760 million from the prior range of $5,600 million to $5,750 million. It also upgraded its adjusted earnings per share guidance to $3.95–$4.00 from the prior range of $3.94–$3.99. The current Zacks Consensus Estimates for earnings per share and revenues for the year are pegged at $3.98 and $5,692 million.

Our Take

We are impressed with St. Jude Medical's first quarter results, which topped estimates at both fronts. Moreover, the company's upgraded earnings and revenues guidance is encouraging. Currently, St. Jude carries a Zacks Rank #2 (Buy).

Other stocks in the medical products industry that are also worth considering include Enzymotec Ltd. ENZY, Edwards Lifesciences Corp. EW, and Owens & Minor Inc. OMI. Enzymotec carries a Zacks Rank #1 (Strong Buy), while both Edwards Lifesciences Corp. and Owens & Minor retain a Zacks Rank #2 (Buy).