Zacks_Analysts' Blog : St. Jude Posts In-Line Prelim Sales - Analyst Blog

Medical devices giant St. Jude Medical (STJ) has unveiled preliminary sales data for fourth-quarter fiscal 2011. The Minnesota-based company expects to post revenues of $1.4 billion for the quarter, up 4% (3% in constant currency) year over year, in line with the Zacks Consensus Estimate.

St. Jude noted that two of its four divisions posted better-than-expected results in the quarter, despite the weakened MedTech fundamentals. The company’s shares rose $1.09 (or 3.15%) to close at $35.70 on Monday.

Per the preliminary data, revenues from the Cardiac Rhythm Management (“CRM”) division, St. Jude’s mainstay, fell 4% year over year to $728 million, indicating sustained weakness in the CRM space. ICD revenues clipped 5% to $436 million and pacemaker sales declined 4% to $292 million. A still choppy U.S.defibrillator market remains an overhang on St. Jude and its peers Medtronic (MDT) and Boston Scientific (BSX).

On a positive note, Atrial Fibrillation revenues climbed 13% year over year to $218 million. Neuromodulation sales jumped 12% to $121 million. The cardiovascular franchise continues its healthy growth streak with revenues surging 18% to $340 million. Within Cardiovascular, vascular products sales crept up 8% to $190 million. Structural heart product revenues soared 35% to $150 million. Healthy growth across these three divisions helped offset the weakness in the core CRM segment.

St. Jude appears optimistic on the earnings front as it expects adjusted (excluding charges) earnings for the fourth quarter to be within its guidance range of 83 cents to 85 cents, issued in October 2011. The current Zacks Consensus Estimate for the quarter is 84 cents. The company expects to report final results before the opening bell on January 25.

On the new product front, the company achieved a massive milestone in the quarter as it won the green signal of the U.S. Food and Drug Administration (“FDA”) for its much-awaited Unify Quadra cardiac resynchronization therapy defibrillator (“CRT-D”), the industry's first quadripolar pacing system. The device is expected to help St. Jude gain ground in the highly competitive U.S. defibrillator market.

We remain impressed by St. Jude’s solid fundamentals, healthy growth trajectory, strong product mix, robust pipeline and cost management initiatives. A spate of new growth drivers (including new products and emerging markets) are expected to offer opportunities for accelerated sales growth over the next few years. However, we remain wary about competition-driven pricing pressure in a soft CRM market. Our Neutral recommendation on the stock is supported by a short-term Zacks #3 Rank (Hold).