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BMO Capital Downgrades St. Jude Medical On 'Less Compelling' Risk/Reward

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In a report published Thursday, BMO Capital Markets analyst Joanne Wuensch downgraded the rating on St. Jude Medical, Inc. (NYSE: STJ) from Outperform to Market Perform, while raising the price target from $80 to $81.

St. Jude reported its 2Q15 results ahead of expectations. The company raised its 2015 guidance of revenue growth to 4-6 percent ex-FX, from 4-5 percent ex-FX, and of EPS to $3.96-$4.00, from $3.92-$3.97.

Referring to the company’s acquisition of Thoratec Corporation (NASDAQ: THOR), analyst Joanne Wuensch said, “We do like this transaction, as it builds the company’s heart failure franchise, further minimizes its reliance on the lower-growth CRM market, and solidly moves the revenue growth rate of the company into the mid- to high-single-digit range.” Wuensch expects the Thoratec acquisition for $3.4 billion to be accretive to 2016 by ~$0.15, or ~3 percent.

In the report BMO Capital Markets noted reasons for not expecting an outperformance as:

  • The growth drivers are better understood
  • Having acquired Thoratec recently, St. Jude is unlikely to be a near-term acquisition candidate
  • “The concerns regarding competitive quadripolar leads is proving unfounded (CRM sales were down 1% ex-FX in 2Q15, in line with the market growth rate).”
  • The company’s shares are up 18 percent year-to-date, versus a 3 percent rise in the S&P 500, and 14 percent over the past 12 months, versus 7 percent for the S&P 500.

The EPS estimates for 2015 and 2016 have been raised from $3.95 to $3.99 and from $4.26 to $4.29, respectively.

Latest Ratings for STJ

Jul 2016WedbushDowngradesOutperformNeutral
Jul 2016Leerink SwannDowngradesOutperformMarket Perform
May 2016BarclaysDowngradesOverweightEqual-Weight

View More Analyst Ratings for STJ
View the Latest Analyst Ratings

Posted-In: BMO Capital MarketsAnalyst Color Downgrades Price Target Analyst Ratings


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